Credit Card Bill Passes House
The House passed the new credit card legislation, joining the Senate in legislation that will now go to Barack Obama to be signed into law.
This is certainly the most ambitious credit card legislation we have seen in years. I think it’s a good thing. I’m still shocked by stories like this one - you realize any one of us can fall into hard times rather quickly.
The NYTimes does a great job of outlining the biggest changes:
- banks must now wait “until you’re 60 days late in making the minimum payment before applying a penalty interest rate to your existing debt.”
- A required 45-day notice before raising your interest rate, which can currently be done at-will
- Bills must be sent 21-days before the due date. I barely look at the paper bills anymore since I do everything online, but most people, I imagine, rely heavily on these notices.
- Banks “will need your permission before allowing you the “privilege” of spending more than your credit limit and paying a fat $39 fee for that privilege.” - currently, if you go over your limit, the transaction is approved regardless, but you are saddled with this hefty fee.
- No one under 21 years of age will be eligible without a parent / guardian signature.
The counter argument to this legislation is that the credit card companies will need to restrict credit since they can no longer compensate for their riskier loans by charging a premium. And that is true - this credit market will tighten. Yet it seems that even a small barrier to digging oneself deep into debt would do a lot of good. Virtually everyone wants to pay off their debts, but when your interest rate can spike overnight, sometimes it becomes impossible to do so.
