The proposed Credit CardHolders’ Bill of Rights (see http://maloney.house.gov/index.php?option=content&task=view&id=1569&Itemid=61) is supposed to help consumers. And in many ways, it would. Unfortunately, like most legislation, it couldn’t come at a worse time. As the credit crunch intensifies, this consumer friendly bill may backfire, drying up available credit to those who need it most.
According to the bill, the Credit CardHolders’ Bill of Rights would do the following:
- Protect cardholders against arbitrary interest rate increases
- Prevent cardholders who pay on time from being unfairly penalized
- Protect cardholders from due date gimmicks
- Shield cardholders from misleading terms
- Empower cardholders to set limits on their credit
- Require card companies to fairly credit and allocate payments
- Prohibit card companies from imposing excessive fees on cardholders
- Prevent card companies from giving subprime credit cards to people who can’t afford them
- Require Congress to provide better oversight of the credit card industry
- Contain NO rate caps, fee setting, or price controls
Now, its hard to argue with the benefits many of these goals would provide to consumers. Unfortunately, many of these proposed changes, if enacted into law, would fundamentally change the way credit card companies do business.
For example, interfering with the fees credit card companies impose on consumers who pay late or go over their credit limits would alter credit card risk management. The people who are getting charged these fees are failing to use their credit wisely. Unfortunately, responsible credit users will pay the price for the irresponsible credit management of others. This price may be a reduction in 0% offers, higher interest rates, and a return to annual fees.
Another major sticking point is protecting cardholders against arbitrary interest rate increases. Here, the definition of arbitrary is the point of interest. Many credit card companies utilize a wide range of data on consumers, such as their credit scores and recent credit history, to determine the interest rates they charge. When a consumer’s credit score drops or credit report changes, credit card companies “reprice” the consumer’s interest rate to control risk. Without the ability to reprice debt from consumers that become risky, credit card companies will again rob Peter to pay Paul. And, in this case, Peter is the consumer that pays his bills on time.
While the Credit CardHolders’ Bill of Rights is not expected to become law this year, many believe it will pass early next year. In the interim, credit card companies may be bracing themselves by limiting the availability of credit to otherwise worthy consumers and making it harder to get 0% interest rates.
The next few months will be interesting in the credit card world. And consumers should be prepared. If you don’t have a 0% credit card in your pocket today, you may not be able to get one two or three months from now, regardless of how good your credit is.
This website was designed to help consumers save money with 0% interest rates. In the coming months, that may be a difficult mission. However, until this bill passes, its a good time to take advantage of the 0% deals available.
For more information, you can compare 0% APR credit cards and apply online at our main site.
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