As one of his first priorities in office, President Barack Obama plans to sign the Credit Cardholder’s Bill of Rights, once it passes through Congress. This bill would:
-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
A credit card agreement is supposed to be a contract, but in recent years cardholders have lost the ability to say no to unfair interest rate hikes and fees. This balanced, moderate bill simply levels the playing field between card companies and cardholders while fostering fair competition and free market values. It sets no rate caps, fees, or price controls, nor does it dictate any business models to card companies.
There is no doubt that credit card companies provide a valuable service and deserve to earn a fair profit, but consumers deserve the right to be able to understand their accounts and be empowered to control them. Regrettably, regulators and prior Congresses have dropped the ball on protecting consumers in recent years. My bill would give cardholders the information and rights they deserve to make decisions about their own credit. – Rep. Carolyn Maloney.
The bill is somewhat of a double-edged sword, though. While it does protect cardholders’ from “major industry abuses that unfairly hurt consumers”, it does so at a cost. The bill’s proponent’s claim that it would foster fair competition and free market values and that credit card companes would not be adversely affected.
The charts say otherwise. Since the beginning of 2009, Visa (V), MasterCard (MA), and Capital One (COF) have all hit rock bottom:
That’s not all. Other unintended consequences include tougher credit standards, meaning fewer will be able to obtain cards. It could also mean higher, albeit fixed, rates for everyone, in order to offset any lost revenue associated with the various fees abolished by this bill of rights.