President, Congress right to press credit card reforms

[babylonsister]

http://www.statesman.com/opinion/content/editorial/stories/04/25/0425credit_edit.html

President, Congress right to press credit card reforms
Legislation would reduce confusion and complicated charges for consumers.
Saturday, April 25, 2009

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Here's just one example that Congress is looking at stopping:

Consumers who have run up a high debt may owe varying rates of interest on different parts of the total debt. If the consumer makes a significant payment, the card company may apply all of the payment to the debt with the lowest interest rate, while the debt with higher interest rates continues to pile up. The result can be that when the next month's bill arrives, the consumer's total debt remains about the same despite the payment.

The proposed legislation would require the credit card company to first apply that payment to the debt with the highest interest rate, giving the consumer a better chance of paying it down.

In the U.S. House, the proposed Credit Cardholders' Bill of Rights Act of 2009 also would require credit card companies to give customers advance notice of any boost in interest rates and ban retroactive rate increases — unless the customer is more than 30 days late in making a payment.

The bill also would ban issuing credit cards to minors and allow consumers to impose a lower credit limit on their cards than what the bank would set. The House bill would make law now many new limits on credit card issuers scheduled to take effect new under Federal Reserve regulations in July 2010.

In the Senate, an even tougher bill would bar credit card companies from increasing interest rates on customers in good standing and from charging any interest on any balance paid by the due date.

Predictably, consumer groups are cheering the changes while the bankers are opposed. The bankers warn that the new rules could make credit more expensive or more difficult to get — as though that hasn't happened already.

The new rules should make consumers more aware of what they are getting into when they borrow money with their credit cards. And if credit card issuers get more careful about granting credit in the first place, that strikes us as a good thing.