Tech & Biz

Banks and Consumers Brace for New Credit Card Rules

by Blue Crush | December 14, 2008 at 02:54 am

293 views | 48 Recommendations | 5 comments

The US credit card industry may face a day of reckoning on Thursday.

The Federal Reserve is to vote on credit card reforms that may bring some relief to customers who face a variety of ways for being hit with late fees, universal defaults, shorter payment periods and confusing payment allocations for different balances.

They are expected to prohibit credit card companies from increasing their rates at will, with some exceptions for over 30 day default. Universal default, which permits changing card terms if the borrower defaults on another bill, is also expected to be banned, as well as double-cycle billing. Credit card users are likely to see easier-to-read tables on their monthly statements. The new rules total some 1,000 pages and need approval of the Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration.

Credit card companies have warned that interest rates charged on credit cards will rise for all borrowers and that borrowing limits may be reduce because of the changes.

As delinquencies and charge-offs -- balances written off as uncollectible -- on credit cards rise, investors demand higher yield spreads for credit card-backed securities.

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Edmund Jenks

at 07:14 on December 14th, 2008

We are beginning to see the dawn of Carter's Second Term where recession and inflation meet in the middle of the classic economic bell curve.

Theoretically, this can not happen ... but that is exactly what happened during the economically horrible Carter Administration (1977-1981).

By the end of his term in office, the prime rate hit 21.5% in December 1980, the highest rate in U.S. history under any President.

Jordan Yerman

at 07:25 on December 14th, 2008

I anticipate that such cards will be harder to attain, as well: in the US, we get credit-card applications as junk mail, whereas in Canada they're a bit harder to get, and start with lower credit limits.

Pre-meltdown, credit-card issuers wanted you to spend beyond your means, so they could collect the higher interest fees as the principal got further and further away, but, when more and more people only send in the minimum ten bucks a month, that model sort of crumbles.

Jarrett Martineau

at 19:15 on December 14th, 2008

Thanks for this.

Art_By_Alida

at 07:37 on December 15th, 2008

I wish credit card companies would disappear and only those which have to be paid back monthly like in the old days would return.

People survived without credit cards before.

The marketing of credit had been a horrible thing for the country.

Apply for credit cards (not verified)

at 18:28 on December 21st, 2008

If credit card issuers are increasing their rates at will to the extent that they depend on this, I believe the issuers have bigger problems.

They need to look at who they approve and what credit lines are given. They have to many people defaulting if they can't make money with interest rates at 10-12%