Barack Obama Credit Card Bill of Rights

[marla]

Barack Obama released his plan to strengthen the economy the other day. It included a credit card bill if rights.

Establish a Credit Card Bill of Rights to Protect Consumers: Obama will create a Credit Card Bill of Rights to protect consumers. The Obama plan will:

Ban Unilateral Changes

Apply Interest Rate Increases Only to Future Debt

Prohibit Interest on Fees

Prohibit "Universal Defaults"

Require Prompt and Fair Crediting of Cardholder Payments

What do you think of this plan?

[jeffmem]

I think the credit card companies won't go for it.

[thekid]

Sounds reasonable, actually.

[bjl584]

I don't see how this will help the economy. It may give some assistance to people with credit card debt, but the effects on the economy will be minimal. Actually, it may encourage people to use credit cards even more and get further into debt since they know that credit card companies will no longer be allowed to impose certain fees and penalties on them. It could have the opposite effect of its stated intent.

[PrincessPerky]

I think all the folk with CC debt will love it...and yeah buying on credit is buying, but I do not see it really helping in the long run.

So my guess is it will pass but not help.

[thekid]

From a consumer perspective sounds fair, though. Don't change terms of a contract without the agreement of both parties. Don't raise interest rates on debt contracted at a lower rate. etc.

I've never paid one cent of interest on credit cards, yet still find this reasonable. Credit card terms aren’t really negotiated on an equal footing between Joe Public and MasterCard. Terms are pretty much imposed. This distortion in free market mechanics IMHO justifies some intervention to level the playing field.

[cptacek]

Don't change terms of a contract without the agreement of both parties. Don't raise interest rates on debt contracted at a lower rate. etc.

You did agree to it. You are using the card. So the contract you signed to get the card gives them the power to do just this. People need to take responsiblity for themselves, not have the government take care of them, and if the contract you signed with the credit card company doesn't seem fair to you, DON'T USE THEM.

[asmom]

You did agree to it. You are using the card. So the contract you signed to get the card gives them the power to do just this. People need to take responsiblity for themselves, not have the government take care of them, and if the contract you signed with the credit card company doesn't seem fair to you, DON'T USE THEM.

You know I agree that people need to take responsibility for themselves but there is something inherently unfair about being able to change the terms of a loan agreement midstream. Again, if they want to raise the rates on new balances going forward, then that is perfectly reasonable but if you sign up for a card with a fixed-rate then they shouldn't be able to raise the rates later on the existing balance. I wonder if you think it would be A-OK if home mortgage companies did this, I mean after all you have to accept responsibility for yourself. If you don't like it, then buy your home with cash right?


Oh and speaking of taking responsibility, if the CC companies decide that they are not making enough money in fees and interest on their customers or they later find out that you are a bad credit risk then they should have to eat it because that is the chance they take when they loan people money. Why should the government take care of them and protect them by law for their bad business decisions?

[jIM_Ohio]

Can't fix stupid. Passing a law to restrict companies practices when people were the ones misusing credit makes little sense.

How about preventing people from racking up debt by making credit limits proportional to income level?

[Hypersion]

I don't want to live in a nanny state.

[Exile]

I think that a prohibition against charging interest on fees is (no pun intended) long overdue.

[sweeps]

This one's a toughy. Looking at it from the consumer's side, the CC company sends this 20 page booklet to you with teeny tiny print that many people won't understand. And then 6 months later they'll send you another one with a bunch of changes made to it. Not many people are going to have the time to analyze the disclosure and see what changed. Then if you have a dispute later you have to go through arbitration, you don't have any recourse through the courts.

[thekid]

To me this is really a question of negotiation power. Which is, well, pretty much non existant in these types of contracts. I'm very much a tenant of letting the free market set the rules, however in situations where one party has the power to impose contract terms on the other, there is no free market mechanics. It's about leveling the playing field in situations where free negotiation isn't possible. It about putting the situation back to where it would be had normal free market conditions existed.

I don't really get "hey let CC companies charge whatever abusive terms they like, I mean take responsibility for yourself" thinking. Massive imbalance in negotiation power call for some minimal protections against abusive practices.

As for irresponsible people who will continue to overspend on credit, well they will still be in deep trouble. This is more about setting fair trade terms than bailling people out of bad decisions.

[thekid]

You did agree to it. You are using the card. So the contract you signed to get the card gives them the power to do just this. People need to take responsiblity for themselves, not have the government take care of them, and if the contract you signed with the credit card company doesn't seem fair to you, DON'T USE THEM.

Well, it's not about me. I've never not paid a credit card in full when due and most probably never will. Still, this has no impact on what I find fair or abusive practice.

Allowing a party with dominating negotiating power to impose terms is not free market friendly.

[bjl584]

It's a voluntary contract. If you don't like the terms or think that they are unfair, then don't use credit cards. The credit card companies don't have the power to force you to use their cards.