Holiday Changes in Credit Card Rules

New Regulations Praised by Consumer Advocates for Timing and Detail

By Stephen Mazeika  

There could be some good news for consumers in an otherwise rough year this holiday season. New legislative proposals are set to soon come into effect to help consumers who have fallen victim to fluctuating rates and sketchy practices by credit institutions.

These new initiatives would prohibit credit firms from increasing rates on outstanding balances, which would be a huge advantage for hard hit consumers in a tough credit market. There are exceptions, however, and they are not unreasonable. If you fail to pay your minimums and if your institutions have already given you a sufficient payment window, you may still be subject to rate increases and fees.

Complaints have poured in

The United States Federal Reserve has received thousands of complaints and comments from angry consumers who say they’ve been victims of shady lending practices, and these new laws are aimed to help them. This is a good sign for people who have already been victimized, and a good future omen for the rest of consumers.

The industry response

There are many people who have plenty of worries in regards to the unforeseen consequences of these new regulations.

"With so many Americans relying on their credit cards as a major source of liquidity, it would be equivalent to a major pay cut," Meredith Whitney, a prominent analyst and managing director of Oppenheimer & Co. said. She predicts that 40% of consumer credit lines, or the equivalent of around $2 trillion, will be unavailable to consumers as a result.

In addition, many from the industry say that the 30 day payment window is too much time to allow people to pay their bills. "We believe the proposed restriction is unnecessarily stringent and would severely curtail the ability of creditors to react to adverse changes in a borrower's risk characteristics during the term of the account," the OCC told the Fed in public comments.

There is also concern in the industry as to the timing of these implementations. Credit card issuers have advocated for a delay until the economy has recovered from its current recession. "If the Fed takes away the ability to reprice [as a result of regulations], then they need to give adequate time for us to work through the process so that we don't have too much risk exposure," Ken Clayton, managing director of the American Bankers Association's card policy council stated.