General Question

MrItty's avatar

How do you feel about Congress and President Obama's new Credit CARD legislation?

Asked by MrItty (17376points) May 26th, 2009

Personally, I’m pretty pissed off. As someone with good credit, who makes decent financial decisions with my credit cards, I’m going to be one of the ones paying more to help out those who made bad decisions.

Under the new law, credit card companies cannot raise the rates of those who miss a payment, unless they’re 60 days past due. The credit company is forced to undue such a rate increase if the customer makes 6 months of on-time payments, regardless of whether or not their financial situation has changed. They cannot charge an over-the-limit fee unless the customer specifically opts-in to over-the-limit charging. The Federal Reserve gets to determine which fees are “fair and reasonable”, rather than the credit card companies.

What all this boils down to is that the credit card companies will no longer be able to make as much money from those who make poor financial & credit decisions.
If you think that simply means the credit card companies will make less money and be done with it, you’re insane. What it means is that they’ll make up that lost income from everyone else. That is, those of us with good credit, who pay on time, who don’t carry a balance. We will see the end of a month-long grace period, and have finance charges applied instantly from the day of purchase. We will see the end of fairly low APRs, as everyone is brought towards the middle.

I know it’s not politically correct, but I’m pretty damn steamed that our government has enacted legislation to protect those who make bad decisions of their own accord, at the detriment of those of us who make good decisions.

Agree? Disagree?

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51 Answers

PandoraBoxx's avatar

The problem with what’s going on with credit cards is that they can raise your rate on your credit card if you’re a few days late paying your water bill. It doesn’t matter if you pay your credit card bill on time, or if you pay more than the minimum payment. As a result, there are people out there paying 34% on credit cards. This is nuts. They will never be able to pay these cards off, because the only way to do so is to make huge lump sum payments. Not being able to pay off your debt also affects the housing market.

ragingloli's avatar

it was way overdue.

MrItty's avatar

@Pandoraboxx “A few days late paying your water bill” is exactly the kind of poor decision I’m talking about. You know how you avoid getting hit for that? By not being late paying your bill.

Lupin's avatar

I also have good credit and only use the cards as a convenience and a zero interest loan. I have not had to pay a finance charge for anything in the past 15 years. Yes, this new legislation will probably cost me money. If any cards ask for an annual fee I’ll drop all but one. I’ll use cash more. It’s inconvenient but I will survive – no problem. I can afford it.
My son on the other hand is late with his payments, pays usurious rates, criminal late fees, and comes to me for help more than I want to admit. Me paying a $35 annual fee, is a lot cheaper than paying off $500 in penalties for him.
I feel fortunate that I fall into the group that will be “hurt” by this new legislation. I figure it’s a little like giving to charity.

MrItty's avatar

@Lupin you’re “fortunate” that you pay your bills on time? That’s not luck. That’s a conscious decision on your (and my) part.

It’s not just you paying a $35 annual fee for your son. It’s the rest of us paying for your son. I applaud your willingness to financially provide for your son. Explain to me why I should have to financially provide for your son now too?

Lupin's avatar

@MrItty You’re right of course. But I figure we (the ones who always pay on time -you and I) are going to end up paying for the people who never get out of debt anyway. The ones that can’t recover are going to declare bankruptcy. One way or the other we are stuck. Either our taxes will go up, or crime will increase or we will pay more for services. I’m glad they are making the credit card laws clear. If I get really mad at the credit card companies I’ll just use cash. That will screw them out of the 5% they are charging the merchant. Don’t worry, the big boys at the top will still collect their bonuses.

I’d like to see some law that prohibits buying stupid stuff if you are more than x months or y dollars in arrears. “Sorry Charlie, you can’t get that plasma TV or set of spinners until you pay off your card.” I’d allow you to pay your heat bill. But that would be too “big brotherish.” My son is very conservative actually. He married into a pile of school debt – she majored in sociology.

MrItty's avatar

I guess I’m just more pissed that Congress & The President took these measures to help those with the poor decision-making skills, seemingly without bothering to consider the impact it would have on the rest of us. Or if they did consider, without caring.

(I do agree however, that the “clear and easy to understand language” clause of the new law is well overdue.)

IchtheosaurusRex's avatar

I’m not happy about a lot of things the Government is doing about the financial mess, but I’m sure some of it is necessary. As to the credit card legislation, you’ve got to consider that a large majority of voters want it, for better or for worse, and people who want to keep their jobs in Washington have to listen to their constituents. Once the unintended consequences of this legislation start to take hold, they might change their minds and call for less regulation. But that’s not the political climate right now.

I would also recall the Faust legend. There have been lots of variations of it, but it always goes like this:

Faust wants something, and he wants it right now.
Faust makes a bargain with The Devil to get it.
Faust regrets what he’s done, but it’s too late.

People who hear this story generally blame Faust for his foolishness. But The Devil is still The Devil. You can blame reckless consumers for the mess they have gotten themselves into, but the credit card companies aren’t blameless in this, either.

MrItty's avatar

@IchtheosaurusRex Let me make it clear that I’m not holding the credit card companies blameless. On the contrary, I think there are far too many CEOs making absurdly good livings off of disgustingly underhanded business practices. My problem is that the new legislation, while at the first glance, pretends to be curtailing the credit card companies Devil-ish practicies and forcing them to make slightly less good livings, is in actually not going to change a single thing about the revoltingly high profits these folks make. All it’s going to change is who they get those profits from. Instead of getting them from the bad decision makers, they’ll now get them from the good decision makers.

If Congress & President Obama wanted to actually hurt the credit card companies, they should have enacted legislation that would forbid them from making up the lost profits from their “good” customers, and instead be forced to take it out of the Executive Salary budget.

syz's avatar

Credit card companies are skeezy, greedy corporations and need to have limits placed on their overt manipulation of consumers. If I added up how much credit I could have with “preapproved” cards, it would pretty much guarantee that if I used it, I would go under. I have a credit rating of 820 and have never been late, but I’ve had my rate jacked multiple times without any notification (I’ve actually had to research what rate I’m paying).

Do card holders need to have personal responsibility? Of course. But in my personal opinion, credit card companies have been operating without any oversight for too long. If that means that I don’t get the cheap credit that I used to, so be it – I shouldn’t be using it anyway.

Lupin's avatar

I’d like to see implemtation of the “No, You Don’t Need It Act.” Anyone 3 months late has to imagine they are asking their father for the money:
“Hey Dad can I have 50 so I can buy her some jewlery?” “No! You Don’t Need It!”
“Hey Dad can I buy that Plasma TV?” “NYDNI”
Alcohol? No! Cable TV? No! Can I get my nails done? No!
Heat? OK! Food at the Farm market? OK! Food at CheRestauran? No.
Car Brakes? OK! Car pin striping? No! Spinners? Break the card!

This would happen every time your card was scanned for authorization. They might even have a recording of his voice in the magnetic strip.
After 6 months of late payments your credit card turns into an EBT card. ~

MrItty's avatar

@syz, you’re okay with the “oversight” affecting your bottom line rather than the credit card company’s? What good does it do to have the Government watching over them if it doesn’t mean anything about how much money they pull in, just where they get their money from?

EmpressPixie's avatar

Okay, first off, let’s be fair about some of this: if you would go over-limit, your card will simply be declined unless you opt into the over-limit-fee thing. You know why they call it a limit? Because you can’t go higher than it. Oh my, and once again, you cannot! Sounds great to me.

Also, I do not think it is fair for a card company to raise my rates because I was late paying, say, my power and internet bills through no fault of my own. They automatically deduct from my card. My card was canceled and I didn’t find out until a few days after the bill due date because there was a security breach with the company. Suddenly I failed to pay two bills. Was this my fault? Do I deserve to pay a higher cost on my credit card (not that I ever do, because I don’t carry a balance).

I also like how you are willfully ignoring the other possibility: cards have said they may reinstate member fees instead of revoking that month of free credit.

You know what else card companies are complaining about? They aren’t allowed to suddenly change your due date to be much sooner than it used to be, thus making you far more likely to miss your due date.

They’ve also give the card companies a list of acceptable fonts and fonts sizes for “small print” so that anyone can actually read it now. Many of these things are massive improvements that the card companies would never make on their own.

MrItty's avatar

@EmpressPixie Yes, the credit card companies currently make much money from the fees of people who can’t control themselves well enough to not go over the limit. With this legislation, they’re going to have a technological restricting that prevents them from going over limit rather than just telling themselves “No, I can’t afford that.” Why is this a good thing? Why is personal responsibility a bad thing? If people are phenomenally stupid enough to go over the limit of their credit cards – either because they can’t control their spending habbits or because they can’t be bothered to keep track of their balances, I have no sympathy for them, and I’m all for the credit card companies charging them fees for their stupidity.

Your situation with your power and internet bills is obviously a rare case, and not at all the norm. There should absolutely be a method for you to contest the rate change and provide your specific case’s example of why it is unfair. That would be a change to the law that I would wholeheartilly support. But legislation blanketly saying that no one who’s not late more than 60 days can have their rate changed? No, I don’t agree with that at all.

I did not “willfully ignore the other possiblity”. I did forget to mention it, yes. I fail to see how it changes the argument, however. Because the credit card companies are no longer able to get their money from the bad-decision makers, I and the other good-decision makers are hit with any or all of: higher rates, no grace period, or re-imposed annual fees.

I completely agree with your bottom two paragraphs, fwiw – duedate changes and impossible-to-read-and-understand agreements are disgusting and I applaud the lawmakers for getting rid of them.

EmpressPixie's avatar

An interesting looks at the situation.

Also, it makes gift cards worthwhile again. I love gift cards because my friends are, for the most part, scattered across the nation. But I hadn’t been using them lately because I never know if they’ll keep their value or if it will be gone practically before they ever get the things. It’s nice.

I’m actually totally down with membership fees because the most famous example of membership fees on cards is AmEx, known for completely amazing customer service and almost always going above and beyond. If my current card tries to slap any fees on me I don’t like, I’ll be moving to a Costco-AmEx faster than they can blink.

MrItty's avatar

@EmpressPixie Interesting article. But the bullet point that pertains to my rant here is nonsensical in the extreme.

“Yesterday, the credit card industry persuaded many journalists to suggest the law dooms perks like frequent-flier miles. Miles are progressively devalued anyway, so that’s no great loss.”

The hell it isn’t. With my normal spending habbits, I earn a free ticket on Southwest Airlines once every 2 to 3 months. I don’t know about other airlines’ cards, but that’s a pretty fricken huge perk for me, that will likely go by the wayside.

“These perks also often seduced consumers into cards with bad terms (miles cards almost always have higher interest rates, for example).”

Which are completely meaningless for those of us good-decision makers who pay off our cards every month.

“Annual fees may reappear, but for many consumers, “free” cards with sneaky fees are more expensive than cards with a predictable annual fee.”

I guess I don’t fall into this «many consumers» category, as I’ve never been hit with «sneaky fees», since I pay on time and the full balance every month.

“And in the past six months, “good” credit cardholders have been treated to huge rate increases”

Which again, don’t apply to those of us paying off our bill every month.

” and credit limit restrictions anyway – not because of federal law, but because of the banks’bad business practices.”

I don’t know where this is coming from. My credit limit keeps going up, not down. They keep trying to get me to spend more money by enticing me to basically buy a car on my credit card. Since I’m not a complete moron, I haven’t taken the bait.

” In general, the credit card industry has made its living through ill-gotten gains earned mainly through deception and confusion.”

… of those who can’t control their spending habbits or pay attention to their balances. Ie, the bad-decision makers.

” Any business built that way is doomed to fail. Purging the industry of treachery is good in the long run. ”

If it was “doomed to fail”, the governement wouldn’t have needed to step in, so that point is obviously self-contradictory.

The author of this article claims that “It will make ‘good’ users pay for bad users.” is “FALSE”, but everything in that bullet point’s section shows that it is absolutely “TRUE”.

ragingloli's avatar

@MrItty you seem to be an extremely selfish person

MrItty's avatar

@ragingloli I have no idea how you get that from anything I said. Would you care to explain?

Staalesen's avatar

Things are not always good and bad cardholder….
Take me for example:
Since my paydays do not corresppond with due dates, I have to keep some cash by to pay it, not a big problem.
Then our washing mashine broke, it was old and out of warranty.
I had to use the CC to buy a new one, or else I had to walk around in dirty clothes, thus keeping me from doing my job ( I work in the service buisness)
That meant I either had to postphone paying my rent, or my CC….
Let me think.. If I dont pay the rent I get thrown out, and no clean clothes/work.
If I put of the CC a while I can pay the rent, get clean clothes and still have mney to eat.
Now here it was not a big deal, since I can make a deal with the CC company to get an interest free 9 month delay, and thus paying it al with my tax refund…
But CC companies that does not do that, and keep increasing the amount would not be as easy.
So here, waiting with the CC is the best way to garantee that everybody is happy. The landlord get his share, I can eat. The only thing is that the CCC dont get their absurdly high interest, witch go straight into the CEOs salary. they get what they lent me, just not much more.

basp's avatar

A while back you disagree with Lupin about being fortunate to be able to pay his bills versus it was a result of his good decision making skills.
Let me suggest that being able to pay ones bills is a combination of both. I know a lot of people right now who have always been finacially responsible and who have lost their jobs due to layoffs. Unempoyment in our town is at record levels we have had five major businesses close their doors impacting hundreds. Our school district is laying off one hundred teachers.
When people’s backs are against the wall, they do sometimes make poor decisions, but many times that poor decision was their best option at the time.
I pay my bills on time so I suppose I will be penalized for those who don’t, but I am fortunate enough to still have a job.

tinyfaery's avatar

Well bully for you @MrItty. Good for you for not being one of the millions to lose their jobs because of, among other things, predatory, greedy credit companies. I hope your luck holds out. What makes you assume all people behind in their payments are people who make “bad decisions”. Judgmental much? You should take up the problem with the pernicious credit companies, and stop blaming people who’s lives you know nothing about.

FrankHebusSmith's avatar

It’s about damn time is what I think.

Banks and credit card companies are the biggest thieves in this country. I personally REFUSE to have a bank account at a major national bank (I use my local credit union), and I avoid using my lone credit card whenever possible.

They gave me an APR of 19% starting out cuz I’m a college student, so apparently I have bad income, so they react by making the amount I have to pay higher? That makes sense…... Then, I was 2 days late once on a payment, and my APR went up to like 32%..... f-ing outrageous.

syz's avatar

[moderator says] Please refrain from personal attacks. Let’s keep the discussion amicable.

evelyns_pet_zebra's avatar

I carry a balance on my cards, but it is nothing too terrible. I think I could probaby go to my bank, get a loan to pay off my CC debt, and then pay the bank back at a much lower interest rate. Then I could tell the CCC to bite my ass.

I’ve had my rates raised a couple of times, and I have never had a late payment in the ten years I’ve had credit cards. It’s about time someone put the CC people’s feet to the coals.

Hell, if ALL the people in this country would pay their fair share of taxes, we would have a decent health care system like Canada, instead of the crappy one we have now.

MrItty's avatar

@tinyfaery Actually, tina, I did lose one of my two jobs, very recently. My spending habbits therefore adjusted accordingly. Not that that’s remotely the point of course.

I’m going to say this again, because apparently it wasn’t clear enough the first time, or the second, or the third. I AM NOT COMPLAINING ABOUT THE CREDIT USERS. I am complaining that the FEDERAL GOVERNMENT has enacted laws that will both cause and allow the greedy, selfish, underhanded, bullying credit card companies to “punish” those of us with good credit and good decision making skills, for no other reason than they can no longer punish everyone else. I am complaining that the FEDERAL GOVERNMENT did not close this loophole and make the greedy, selfish, underhanded, bullying credit card companies have to accept the fact that they can’t make as much money from their greedy, selfish, underhanded, bullying business practices and have to suck up the loss.

Is that any clearer? Am I still “selfish”?

basp's avatar

There is an old saying… ‘you can’t squeeze blood out of a turnip’.
Any time legislation is enacted to assist a particular target group, in this case those who have been unable to pay their bills on time, the burden is passed on to another group.
I would like to see the credit card companies bear that full burden, but the reality is that won’t happen. So, I’m willing to settle for the second best option, sharing the burden, rather than do nothing. My understanding if the bill is that the credit cards companies will carry a bigger burden than I do.
Is it a perfect solution…no, from my point of view. But it is a step in the right direction and we have to start somewhere.

MrItty's avatar

@basp – the reason you can’t squeeze blood out of a turnip is that a turnip doesn’t have any blood.

You can, in fact, squeeze money out of the credit card companies, because they have bucketloads. The Government has chosen not to, and is instead allowing them to squeeze money from us. That is my beef.

basp's avatar

The credit cards will bleed a little over this legislation. Not as much as you or I would like them to, I’ll grant you that.

critter1982's avatar

If you don’t want to pay for everyone else then use your debit card rather than your credit card. The government is not forcing you to use your credit card and/or pay for other peoples poor financial decisions. With that said though, I don’t personally agree with the legislation. This is another prime example of our government trying to legislate morality/ethics, but then again I don’t personally agree with the way credit card companies are run either.

tinyfaery's avatar

Your question is judgmental. Justify however you see fit.

I made no personal attack.

critter1982's avatar

Pew Research Center did a study in Apr. 2009. They concluded that 41 percent of U.S. adults, more than 92 million people living in America, gave themselves a grade of C, D, or F on their knowledge of personal finance.

In 2007, before the recession began, 14.7 percent of U.S. families had debt exceeding 40 percent of their income. This is a consumer problem and is partially an educational problem.

U.S. consumers racked up an estimated $51 billion worth of fast food in 2006.

47% of credit card users said they see a microwave as a necessity, down from 68% in 2006. 52% see TV as a necessity, down from 64% in 2006. The car dropped slightly in the necessity list, with 88% of Americans seeing it as indispensable, compared to 91% in 2006.

I think the issue has to deal with several things. The entitlement and immediate gratification thought process of credit card users. Many peoples concept of necessity is based on what their neighbors have. Personal finance education is another big problem. We teach kids L’Hospital Rule for first order differentiation but no where do they get educated on basic personal finance, how to balance your budget, file your taxes, buy a car, or even how to save. From the time your old enough credit card companies slam applications down their throats. The current economy is the 3rd problem. Whether people truly can’t afford the basis necessitites or whether they don’t want to downgrade their lifestyle when they lose their job.

Credit card debt keeps increasing and unless something is done now, credit card defaults will be the next hit to our economy. I think Obama is trying to prevent what could be a somewhat catastrophic hit to our society if all of these credit card companies were to fail. Personally I love to see all the credit card companies fail but I’m not so sure our economy could take that right now.

casheroo's avatar

@syz said it better than I could have.

Zaku's avatar

Credit card companies have been way too abusive for way too long, and it’s created an abusive situation for far too many people. The new laws could be a lot stronger and I’d still approve them.

RedPowerLady's avatar

I just want to through something out there. Some people really do have legitimate reasons for not being able to pay credit premiums. Say they lose their job for instance. Or charged the credit for a necessary medical expense. You can rightly be mad all you want but helping out people who legitimately need it is not a bad thing.

I won’t even get into how sleezy credit card companies and their practices are because it has been eloquently said a few times already.

MrItty's avatar

@RedPowerLady I don’t really disagree with anything you said, except to point out that legally-required charity… isn’t.

PandoraBoxx's avatar

@MrItty, you’re right, you should pay your bills on time. And you should have money in savings to cover unforeseen expenses. However, in one month, I had the refrigerator die, the washing machine break, $1500 in car repair expenses, and my daughter’s book bill come in at $300 more than what was budgeted, and the utility company misestimate my electricity, and send me a bill for $800. Life does not always fit your budget, and sometimes it’s not always possible to budget to fit the circumstances. I would love it if I only had to pay expenses for myself, but there are four people in our household, and two of them have minimal income.

gooch's avatar

I too am pissed off with this new garbage. Next people who pay there house notes on time and do without to make that happen will be bailing out people who don’t pay there notes on time because they over bought or did not save up for future financial hard times.

PandoraBoxx's avatar

One in 13 houses in Cleveland is in foreclosure or empty. Do you know what that does to your tax base? In CA, banks are demolishing brand new houses that are in foreclosure because there are no buyers.

Once your tax base goes, the rest of your city infrastructure goes. Police, teachers, garbage pick-up, summer jobs for students, park maintenance…

Urban's avatar

Typically, people with good credit have minimal balances or pay off their balance every month so I’m so sure it really affects them as much as you think. I have great credit, with an almost zero balance, and the bulk of it was from college when I didn’t have steady income. I’ll be out of debt soon enough that I haven’t even bothered to read up on what this new legislation is about and I would think people with “good” credit would feel the same.

Also, you’re complaining about something in a system where someone who buys everything in cash would have poorer credit than someone that buys on credit, yet the person that buys on credit would be the more likely one to get a loan. And that may seem as though it wouldn’t matter to the person who always buys in cash, but there is always a time, where you need a loan for some reason or the other and the system has made it so that someone who has outstanding debt would be allowed to get more debt than the person that has zero debt.

MrItty's avatar

@Urban, you miss the point entirely. The point is that as a result of the new legislation, “having minimal balances” and “pay[ing] off their balance every month” will no longer be enough to avoid fees. Everyone’s rates are going to rise, so even those minimal balances are going to cost more. And either Annual Fees will be brought back to the norm, or the grace period will be done away with (or both) so paying of the balance every month will still incur fees as well.

MrItty's avatar

Case in point, after I got home yesterday and checked my mail, I found a notice from one of my credit cards – one I haven’t used in over a year, btw, that my interest rate is being raised another percentage point. Why? Because they can, and “have to” in order to stem the tide of the lost earnings the new legislation is going to cost them.

EmpressPixie's avatar

MrItty: It depends on consumers, I think. If they add fees and immediately charge interest, those who can afford to will simply stop using cards and/or cancel them. Consumers CAN force the credit card companies to behave. They just have to be interested in it.

critter1982's avatar

@EmpressPixie: But the credit card companies aren’t interested in those consumers that pay off their credit card every month. They actually lose money on these people (their term for people who pay off their credit card every month is dead beats). I don’t think consumers will be able to do anything about it. Just my opinion!

EmpressPixie's avatar

It’s true they don’t like them (they usually break even on ‘em with the merchant fee), but number of customers and amount of credit provided is quite important to their business. Sure they hate us, but they kind of need us.

RedPowerLady's avatar

@MrItty I don’t think it is as much charity as it is putting them in their place and not allowing them to take advantage of people in such poor life positions.

Then again I think I might like legal required charity.

MrItty's avatar

@RedPowerLady How is being forced to give them your money “putting them in their place”? They’re going to be making exactly as much as they were before, their CEOs and other executives will have exactly the same salaries and lifestyles they had before. Only difference is which customers are being forced to give their money to them, because the new legislation says “you can’t screw over these people”, so they get to say “that’s okay, we’ll just screw over those people instead”.

RedPowerLady's avatar

@MrItty But that isn’t true if the customers who do pay on time don’t allow the credit companies to raise their rates. They just may have to not use their cards until the companies are “put in their place”. Of course that is horrible for the people who can pay on time. But that isn’t a reflection on the new law. That is a reflection on the credit card companies who will do anything to make a buck. Perhaps the new law should have something in it that protects those who do pay on time as well as those who can’t. That would certainly be more equal and fair. No?

ragingloli's avatar

general interest rate increases should only be allowed if it comes with a separete update of the original contract, that the customer is allowed to reject without having the risk of termination of contract.

MrItty's avatar

@RedPowerLady Yes. That is precisely what I’ve been complaining about. That the law only protects those who don’t/can’t pay on time, and does nothing to protect those of us who do pay on time, who do make all our payments, who do pay every month.

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