I am seeing a trend in Washington. It seems that Washington is falling into this habit of introducing real strong legislation aimed at helping consumers against credit card companies as well as programs to help people who are facing foreclosure. They are announced with big fanfare. Then, as if nothing were ever announced, you hear nothing about them again.
There was a strong piece of legislation aimed credit card company reform that was being discussed on Capital Hill last year. I made the statement then that it would be a miracle if it ever became law because it was a good piece of legislation that would regulate the unethical practices of credit card companies and help the debt strapped consumer.
Either politicians have good intentions and actually think that they can get good consumer legislation passed or our politicians are just going through the motions in order to look like they are actually representing the people of their district. Realistically, it is a little bit of both.
Politicians, regardless of their intentions, will come up with pretty common sense solutions that really would help consumers. The problem is that good solutions for the American voter and consumer don’t make good political solutions. After all, it is big business that lines the coffers of politicians. Thus, these pieces of legislation fall by the wayside.
The latest is a bill of rights for credit cardholders designed to level the playing field between credit card companies and consumers. The bill is aimed at preventing major credit industry abuses while fostering fair competition between card issuers.
Most of the bill is fluff. They want to force credit card companies to be clearer about the terms and conditions. Of course, that is really not going to solve anything. The right credit card legislation has two important details.
First, it would not allow credit card companies to arbitrarily raise interest rates. This is referred to as the universal default clause where you sign on the dotted line, giving the credit card companies the right to raise rates for any reason.
Second, it would forbid excessive fees charged by credit card companies.
Those are the two fixes that are needed in the credit card industry. If those two simple laws went into effect, we would have made some real good progress.
To take it a step further, Congress should limit how high credit card companies can raise your credit card rates. Currently, they shift that burden to state government. This is a real serious issue for consumers. I wish someone in Congress could tell me why 30% plus interest rates are fair to the consumer?
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
