Washington Post Editorial: ‘Better Credit Card Rules for Consumers’

Last year, Congress passed and the President signed into law the Credit Cardholders’ Bill of Rights — providing increased consumer protections against credit card companies, common-sense industry regulations, and greater transparency. In August, the last phase of the new regulations went into effect. From the Washington Post:

…Among other things, the new rules ban credit card companies from charging fees that are larger than the infraction: If you miss a $20 payment, the maximum penalty is $20. Thus, the finishing touches are on a revamped credit card regulatory structure that will also require issuers to apply any payment over the minimum due to the highest interest portion of a customer’s debt and make it harder for companies to market plastic to students under 21. Between 1989 and 2006, total credit card charges increased from $69 billion a year to more than $1.8 trillion. But now, those go-go days are over.

The excessive extension of credit to riskier and riskier segments of the borrowing public was partly responsible for the huge bubble of debt that burst in 2008, bringing on the recession.

…credit cards were also an important factor in building up total U.S. household debt to a peak of 138 percent of disposable income just before the crash. Households were inevitably going to have to deleverage with or without the CARD Act. And there are signs that this painful but necessary process is going relatively well: Credit card losses are falling faster than the unemployment rate, according to a recent report by Moody’s…

In short, the consumer-credit business is being put back on a more sustainable basis. And in the new world of the CARD Act, it is less likely that the business can easily return to the days when card issuers attempted to extend every last dollar of credit to every single borrower they could squeeze into a “risk-based pricing” formula…

Read a good summary of the new rules that took effect in August from the Army Times»

Learn more about the provisions of the Credit Cardholders’ Bill of Rights that went into effect last month»

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