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Fox
Joined: 04 Mar 2009
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 Posted: Mon May 11, 2009 7:30 pm Post subject: Credit Card "Bill of Rights" |
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So the credit card bill of rights is currently up for consideration in the Senate. The summary of the bill of rights in its current incarnation is as follows:
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THE CREDIT CARD ACCOUNTABILITY RESPONSIBILITY AND DISCLOSURE ACT
Prevents Unfair Increases in Interest Rates and Changes in Terms
� Prohibits arbitrary interest rate increases and universal default on existing balances;
� Requires a credit card issuer who increases a cardholder's interest rate to periodically review and decrease the rate if indicated by the review;
� Prohibits credit card issuers from increasing rates on a cardholder in the first year after a credit card account is opened;
� Requires promotional rates to last at least 6 months.
Prohibits Exorbitant and Unnecessary Fees
� Prohibits issuers from charging a fee to pay a credit card debt, whether by mail, telephone, or electronic transfer, except for live services to make expedited payments;
� Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions;
� Requires penalty fees to be reasonable and proportional to the omission or violation;
� Enhances protections against excessive fees on low-credit, high-fee credit cards.
Requires Fairness in Application and Timing of Card Payments
� Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
� Prohibits issuers from setting early morning deadlines for credit card payments;
� Requires credit card statements to be mailed 21 days before the bill is due rather than the current 14.
Protects the Rights of Financially Responsible Credit Card Users
� Prohibits interest charges on debt paid on time (double-cycle billing ban);
� Prohibits late fees if the card issuer delayed crediting the payment;
� Requires that payment at local branches be credited same-day.
Provides Enhanced Disclosures of Card Terms and Conditions
� Requires cardholders to be given 45 days notice of interest rate, fee and finance charge increases;
� Requires issuers to provide disclosures to consumers upon card renewal when the card terms have changed;
� Requires issuers to provide individual consumer account information and to disclose the period of time and total interest it will take to pay off the card balance if only minimum monthly payments are made;
� Requires full disclosure in billing statements of payment due dates and applicable late payment penalties.
Strengthens Oversight of Credit Card Industry Practices
� Requires each credit card issuer to post its credit card agreements on the Internet, and provide those agreements to the Federal Reserve Board to post on its website;
� Requires the Federal Reserve Board to review the consumer credit card market, including the terms of credit card agreements and the practices of credit card issuers and the cost and availability of credit to consumers.
Ensures Adequate Safeguards for Young People
� Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;
� Limits prescreened offers of credit to young consumers;
� Prohibits increases in the credit limit on accounts where a parent, legal guardian, spouse or other individual is jointly liable unless the individual who is jointly liable approves the increase in writing.
Enhanced Penalties
� Increases existing penalties for companies that violate the Truth in Lending Act for credit card customers.
Gift Card Protections
� Protects recipients of gift cards by requiring all gift cards to have at least a five-year life span, and eliminates the practice of declining values and hidden fees for those cards not used within a reasonable period of time.
Encourages Transparency in Credit Card Pricing
� Requires the GAO to study the impact of interchange fees on consumers and merchants, specifically their disclosure, pricing, fee and cost structure.
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The full text of the bill is included in the article link. |
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Rusty Shackleford
Joined: 08 May 2008
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| Posted: Mon May 11, 2009 7:45 pm Post subject: |
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| Net result=people who used credit cards irresponsibly win. The rest of us (those who took five minutes to learn about personal finance) pay for it. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Mon May 11, 2009 8:01 pm Post subject: |
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I like this guys opinion:
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Congress is going to enact a credit card bill �which restricts how lenders increase credit-card rates and impose fees.�
Sounds like a great idea to me, but on CNBC, there have been some knee-jerk conservatives who have been railing against the measure. �Regulating business be socialist� they say. This attitude is based on the false theory that any company which makes a profit is creating value equal its the profit. They don�t understand the concept of value transference. The credit card industry is a pure value transference industry, which transfers value by two means: (1) preying upon consumers with low future time orientation who use more consumer credit than is in their own rational best interest; and (2) through asymmetric information�in other words, the consumers don�t realize what a bad deal they are getting because they are bad at math, haven�t read the fine print, or don�t realize their likelihood to trigger penalty fees.
It may even be argued that the credit card industry is a negative sum industry because it encourages the overleveraging of consumers which exacerbates the severity of the business cycle and has partially contributed to the current economic downturn.
As far as I know, the new bill being proposed by Congress will attack the asymetrical information aspect of the credit card industry, so here is an example where regulation promotes a better free market, because the most efficient allocation of resources can only happen when both parties to a transaction are fully knowledgeable about the nature of the transaction. |
http://www.halfsigma.com/2009/05/regulation-of-the-credit-card-industry-good-regulation.html
http://www.pbs.org/wgbh/pages/frontline/shows/credit/ |
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Rusty Shackleford
Joined: 08 May 2008
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| Posted: Mon May 11, 2009 8:17 pm Post subject: |
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| Quote: |
| 2) through asymmetric information�in other words, the consumers don�t realize what a bad deal they are getting because they are bad at math, haven�t read the fine print, or don�t realize their likelihood to trigger penalty fees. |
This is the main problem with credit cards. The companies use legal obfuscation to confuse consumers. The contracts are long and full of legalize so who actually reads them? Most people can't. Even lawyers. I don't have a solution to this, but no doubt whatever cure is dreamed up will be worse than the disease.
To say that credit cards are a zero sum game is to miss the point. If used properly, by an informed consumer, they are a great financial tool. I have trouble getting my limit extended because I've never payed a cent in interest.
Once again, we are making the mistake of penalizing the responsible individual to make up for the losses of a minority, who refuse to learn from their mistakes. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Mon May 11, 2009 8:47 pm Post subject: |
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There's no limit on credit card interest.
I'm thinking 20% should be the maximum. |
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Rusty Shackleford
Joined: 08 May 2008
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| Posted: Mon May 11, 2009 9:11 pm Post subject: |
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| Kuros wrote: |
There's no limit on credit card interest.
I'm thinking 20% should be the maximum. |
That figure seems pretty arbitrary to me. That will just make it harder to get credit, leading to the uncredit worthy turning to loan sharks who charge 20% a day. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Mon May 11, 2009 9:18 pm Post subject: |
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| Rusty Shackleford wrote: |
| Kuros wrote: |
There's no limit on credit card interest.
I'm thinking 20% should be the maximum. |
That figure seems pretty arbitrary to me. That will just make it harder to get credit, leading to the uncredit worthy turning to loan sharks who charge 20% a day. |
Yes, I know, all sorts of bad things will happen if we set a ceiling on credit card interest.
*yawn*
Apparently rates are set by the states, but of course most credit card companies operate out of ND or DE, which allow them to pretty much set rates as they please. Many cards set universal default levels at 29%. The highest are 33%, and a few max at 24%.
Last edited by Kuros on Mon May 11, 2009 9:33 pm; edited 1 time in total |
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blade
Joined: 30 Jun 2007
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| Posted: Mon May 11, 2009 9:23 pm Post subject: |
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| I think the government should make it easier for people to declare bankruptcy over credit card arrears. |
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patongpanda
Joined: 06 Feb 2007
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| Posted: Mon May 11, 2009 9:24 pm Post subject: |
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Congress Working On Credit Card Reform
The House Financial Services Committee has approved a "Credit Cardholders' Bill of Rights" designed to control the detrimental habits of credit card companies. Here are some of the reforms suggested:
Companies must offer more badass card designs, such as a Sherman tank or the Mot�rhead insignia
When you've gone over your limit, someone from the credit card company will come hang out at your place to prevent you from going out
Agents can no longer use the phrase "it's like free money" when describing their product.
Card issuers not allowed to even imply that the "platinum" designation holds any sort of prestige
Lenders should make it clearer from the outset that they actually want their money repaid
All things will be made less appealing to buy
Credit cards must feature a picture of your parents looking disapproving on them
Zero percent interest on stuff bought while obviously drunk
Onion. |
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Enrico Palazzo
Mod Team
Joined: 11 Mar 2008
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| Posted: Mon May 11, 2009 9:34 pm Post subject: Re: Credit Card "Bill of Rights" |
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| Fox wrote: |
So the credit card bill of rights is currently up for consideration in the Senate. The summary of the bill of rights in its current incarnation is as follows:
| Quote: |
THE CREDIT CARD ACCOUNTABILITY RESPONSIBILITY AND DISCLOSURE ACT
Prevents Unfair Increases in Interest Rates and Changes in Terms
� Prohibits arbitrary interest rate increases and universal default on existing balances;
� Requires a credit card issuer who increases a cardholder's interest rate to periodically review and decrease the rate if indicated by the review;
� Prohibits credit card issuers from increasing rates on a cardholder in the first year after a credit card account is opened;
� Requires promotional rates to last at least 6 months.
Prohibits Exorbitant and Unnecessary Fees
� Prohibits issuers from charging a fee to pay a credit card debt, whether by mail, telephone, or electronic transfer, except for live services to make expedited payments;
� Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions;
� Requires penalty fees to be reasonable and proportional to the omission or violation;
� Enhances protections against excessive fees on low-credit, high-fee credit cards.
Requires Fairness in Application and Timing of Card Payments
� Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
� Prohibits issuers from setting early morning deadlines for credit card payments;
� Requires credit card statements to be mailed 21 days before the bill is due rather than the current 14.
Protects the Rights of Financially Responsible Credit Card Users
� Prohibits interest charges on debt paid on time (double-cycle billing ban);
� Prohibits late fees if the card issuer delayed crediting the payment;
� Requires that payment at local branches be credited same-day.
Provides Enhanced Disclosures of Card Terms and Conditions
� Requires cardholders to be given 45 days notice of interest rate, fee and finance charge increases;
� Requires issuers to provide disclosures to consumers upon card renewal when the card terms have changed;
� Requires issuers to provide individual consumer account information and to disclose the period of time and total interest it will take to pay off the card balance if only minimum monthly payments are made;
� Requires full disclosure in billing statements of payment due dates and applicable late payment penalties.
Strengthens Oversight of Credit Card Industry Practices
� Requires each credit card issuer to post its credit card agreements on the Internet, and provide those agreements to the Federal Reserve Board to post on its website;
� Requires the Federal Reserve Board to review the consumer credit card market, including the terms of credit card agreements and the practices of credit card issuers and the cost and availability of credit to consumers.
Ensures Adequate Safeguards for Young People
� Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;
� Limits prescreened offers of credit to young consumers;
� Prohibits increases in the credit limit on accounts where a parent, legal guardian, spouse or other individual is jointly liable unless the individual who is jointly liable approves the increase in writing.
Enhanced Penalties
� Increases existing penalties for companies that violate the Truth in Lending Act for credit card customers.
Gift Card Protections
� Protects recipients of gift cards by requiring all gift cards to have at least a five-year life span, and eliminates the practice of declining values and hidden fees for those cards not used within a reasonable period of time.
Encourages Transparency in Credit Card Pricing
� Requires the GAO to study the impact of interchange fees on consumers and merchants, specifically their disclosure, pricing, fee and cost structure.
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The full text of the bill is included in the article link. |
That looks much longer than the 300 word limit. If it were 400, that might be understandable.
Thanks,
'Rico |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue May 12, 2009 6:16 am Post subject: |
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I support capping the total amount of consumer debt an individual can take based on his income. The level of debt in our societies is destablizing.
http://finance.yahoo.com/banking-budgeting/article/107062/Banks-Brace-for-Credit-Card-Write-Offs
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Banks Brace for Credit Card Write-Offs
It used to be easy to guess how many Americans would have problems paying their credit card bills. Banks just looked at unemployment: Fewer jobs meant more trouble ahead.
The unemployment rate has long mirrored banks' loss rates on card balances. But Eddie Ward, 32 and jobless, may be one reason that rule of thumb no longer holds. For many lenders, losses are now starting to outpace layoffs.
Mr. Ward, of Arkansas, lost his job at a retail warehouse in April and so far has managed to make minimum payments on his credit card debt, which he estimates at $15,000 to $20,000. Asked whether he thinks he will be able to pay off his balance, he said, "Not unless I win the lottery."
Experts predict that millions of Americans will not be able to pay off their debts, leaving a gaping hole at ailing banks still trying to recover from the housing bust.
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Fox
Joined: 04 Mar 2009
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| Posted: Tue May 12, 2009 5:12 pm Post subject: |
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| Rusty Shackleford wrote: |
| That figure seems pretty arbitrary to me. That will just make it harder to get credit, leading to the uncredit worthy turning to loan sharks who charge 20% a day. |
I keep hearing this: but if we enact <reasonable sounding credit reform x>, it will make it harder to get credit! You know what? It should be harder to get credit than it is right now. The level of credit in our economy -- and how necessary credit has become to function in our economy -- has become problematic.
As far as your "everyone credit unworthy now goes to a loan shark" theory, honestly, who cares? Loan sharks destabilize the lives of individual, unwise people; it's a shame, but the people in question bring those negative consequences upon themselves. Over-availibility of legal credit, on the other hand, affects the entire economy, which results in even those of us who make wise decisions having to deal with the consequences.
As an aside, given how against government regulation you are, you should have no problem what so ever with loan sharks; they're a good example of unregulated free market behavior at work. |
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Rusty Shackleford
Joined: 08 May 2008
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| Posted: Tue May 12, 2009 10:46 pm Post subject: |
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| Fox wrote: |
| Rusty Shackleford wrote: |
| That figure seems pretty arbitrary to me. That will just make it harder to get credit, leading to the uncredit worthy turning to loan sharks who charge 20% a day. |
| Quote: |
I keep hearing this: but if we enact <reasonable sounding credit reform x>, it will make it harder to get credit! You know what? It [b]should be harder to get credit than it is right now[/b]. The level of credit in our economy -- and how necessary credit has become to function in our economy -- has become problematic.
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You say "reasonable sounding" but a lot of stuff sounds reasonable. http://en.wikipedia.org/wiki/Unintended_consequence
How difficult or easy getting credit should be really isn't for you to say. I agree with you that the level of credit is problematic, but who's fault is that.........
Where do you think all that excess credit came from? It was the fed keeping the official cash rate too low for too long. The cc cos wouldn't have lent so much cash if it wasn't so cheap and basically guaranteed.
| Quote: |
| As far as your "everyone credit unworthy now goes to a loan shark" theory, honestly, who cares? Loan sharks destabilize the lives of individual, unwise people; it's a shame, but the people in question bring those negative consequences upon themselves. Over-availibility of legal credit, on the other hand, affects the entire economy, which results in even those of us who make wise decisions having to deal with the consequences. |
Didn't the people who took on credit card debt do the exact same thing? Doesn't cc debt do the same? And were'nt those people unwise to do it? I see no real difference between a person taking on excess cc debt and excess loan shark debt. I know which one I'd rather have, though.
As an aside, given how against government regulation you are, you should have no problem what so ever with loan sharks; they're a good example of unregulated free market behavior at work. |
I'm not condoning loan sharking, but I bet there is an extremely low level of default on shark loans.
In all honesty, I agree with you that the cc industry needs to fall into line. I'm not really against regulation, I'm just realistic about what govt is really capable of doing.
The main problem with the cc industry is that the terms are sometimes quite hard to follow and can be changed unfairly. Increasing the interest rate on outstanding balances for instance but ultimately the cc cos were only doing what any rational business would do to maximize it's profits amidst the moral hazards that govt regs create.
EDIT:This is incredibly poorly edited. Hopefully you can follow it:EDIT |
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Fox
Joined: 04 Mar 2009
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| Posted: Wed May 13, 2009 2:29 am Post subject: |
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Being scared of vague, hypothetical consequences you cannot yourself ennumerate isn't very compelling.
| Rusty Shackleford wrote: |
How difficult or easy getting credit should be really isn't for you to say.
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The truth value of an idea is completely unrelated to the person presenting said idea.
| Rusty Shackleford wrote: |
| I agree with you that the level of credit is problematic, but who's fault is that......... |
I don't care whose fault it is, I care about it being fixed.
| Rusty Shackleford wrote: |
| Quote: |
| As far as your "everyone credit unworthy now goes to a loan shark" theory, honestly, who cares? Loan sharks destabilize the lives of individual, unwise people; it's a shame, but the people in question bring those negative consequences upon themselves. Over-availibility of legal credit, on the other hand, affects the entire economy, which results in even those of us who make wise decisions having to deal with the consequences. |
Didn't the people who took on credit card debt do the exact same thing?
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Yes.
| Rusty Shackleford wrote: |
| Doesn't cc debt do the same? |
Yes.
| Rusty Shackleford wrote: |
| And were'nt those people unwise to do it? |
Yes.
| Rusty Shackleford wrote: |
| I see no real difference between a person taking on excess cc debt and excess loan shark debt. |
I flat out told you the difference in the very section of text you quoted: the negative consequences of loan sharking are more or less limited to the individuals who take the loans. The negative consequences of credit cards impact the entire economy.
| Rusty Shackleford wrote: |
| In all honesty, I agree with you that the cc industry needs to fall into line. I'm not really against regulation, I'm just realistic about what govt is really capable of doing. |
Okay. |
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Rusty Shackleford
Joined: 08 May 2008
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| Posted: Wed May 13, 2009 2:55 am Post subject: |
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| Fox wrote: |
Being scared of vague, hypothetical consequences you cannot yourself ennumerate isn't very compelling. |
Can you ennumerate the benefit of govt intervention than just doing nothing? The knife cuts both ways.
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| Rusty Shackleford wrote: |
How difficult or easy getting credit should be really isn't for you to say.
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The truth value of an idea is completely unrelated to the person presenting said idea. |
You are being as dogmatic here, as you often accuse me of being.
| Quote: |
| Rusty Shackleford wrote: |
| I agree with you that the level of credit is problematic, but who's fault is that......... |
I don't care whose fault it is, I care about it being fixed. |
So more govt is the answer? They got it wrong the first time, what makes you think they are the best people to fix it.
We all want to see the problem fixed. First of all how big is the problem? and what are the knock on effects of fixing it? Are they worse than doing nothing?
| Quote: |
| Rusty Shackleford wrote: |
| I see no real difference between a person taking on excess cc debt and excess loan shark debt. |
I flat out told you the difference in the very section of text you quoted: the negative consequences of loan sharking are more or less limited to the individuals who take the loans. The negative consequences of credit cards impact the entire economy. |
Is that really true? I see no difference between shark loans and credit card loans. You havn't given me a reason to think otherwise. They are both still debt. Shark loans don't stop existing just because the govt says so (ie made them illegal).
I know what your response is going to be. You will accuse me of being dogmatic and you would be right, but no more dogmatic than you are being. At least my beliefs stand up to some thoughtful enquiry. There is no thought experiment, or real data to suggest that govt tinkering has any long term net-benefit. The reason there is no data is because we only live once, therefore you can't do an experiment to see which process would produce the best outcome and the majority of the time we take the interventionist route. |
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