When the Federal Reserve meets on Thursday they will vote on whether or not to accept sweeping regulatory changes in the credit card industry. The major objective of the new rules is the ending of the current practice of credit card issuers raising interest rates on existing credit card balances.
It has long been the practice of banks and credit card issuers that they could raise their rates on their account holders whenever it suited them, without having a reason. The Fed received over 65,000 comments on its web site telling of predatory lending practices on the part of the credit card companies. It is a central issue of fairness in many cardholder’s eyes.
A single mother of three wrote the Fed to tell them how her credit card company raised her rate from 7.9% to 29.99%. She claimed that she has paid her bills on time and that there was no reason given to her to justify the steep increase. Her comment was not the only one of that nature. There were a great many like it.
These changes have been a long time coming in the eyes of this consumer. For far too long the lobbyists employed by the credit card companies have held sway over the legislators. They get favorable laws passed seemingly at will.
The Federal Reserve is simply responding to what amounts to a barrage of complaints left on their web site. Even when cardholders admit to making a mistake and paying late, or not paying in full, they overwhelming feel it is unfair for the credit card issuers to increase the APR on their existing balances and most especially, increasing it exponentially.
And unfortunately for the people that have always paid on time, many are now getting notices in the mail of increases in their interest rates. The credit card companies are basically trying to recoup the losses incurred from delinquent cardholders on the backs of those that pay on time. And they are trying to do it before the proposed January 1st law prohibiting doing that very thing goes into effect.
It should be stated that the new laws would only prohibit raising rates on current balances and does not apply to future purchases or cash advances.
We will be monitoring the Fed’s ruling and reporting on it.