Sun editorial:

Good credit? Too bad

If forced to be more transparent, credit card issuers expected to ding their best customers

Wednesday, May 20, 2009 | 2:07 a.m.

Fast-moving bills in Congress that would enable credit card holders to fully understand their obligations and to be protected from exorbitant interest rates will not, in all likelihood, be taken sitting down by the credit card industry.

If the industry can no longer unendingly squeeze billions of dollars from people who fall behind in their payments, it will begin going after people with excellent credit, according to financial experts interviewed by The New York Times.

Banks and credit card companies are expected to do this by imposing annual fees, cutting awards programs and starting the clock on interest the moment a card purchase is made, instead of allowing a weeks-long grace period.

Congress decided to crack down on the lightly regulated credit card industry after consumers caught up in the recession began lodging bitter complaints. They said the companies were springing hidden fees on them, lowering their credit limits and instantly raising their interest rates. Consumers who were making their minimum monthly payments on time were among those complaining the loudest.

The House, in a 357-70 vote on April 30, passed a bill adding regulations to the credit card industry and the Senate passed an even stronger bill on a 90-5 vote Tuesday.

The Senate bill, among other reforms, would require a person to be 60 days behind in payments before the interest on his credit card balance could be raised. It would also restore the original interest rate if the account holder subsequently made his payments on time for six months.

Both bills would require credit card issuers to succinctly and in plain English spell out all rules governing the cards, including penalty and interest policies.

President Barack Obama has asked Congress to have a bill ready for him to sign into law by Memorial Day.

Our view is that the law would require what the credit card companies should have been doing all along — engaging in transparent and fair business practices. Card holders with good credit should not have to pay extra for that.

Discussion: 4 comments so far…

By goingbust

5/20/09 at 10:29 a.m.

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They say they will, but frankly, I doubt it. The best customers are the ones that are in the best position to shop around. All it would take is one major bank (or even not so major) to offer a "good deal" (i.e. the current deal) to the best customers out there and it would break this strategy as the best customers would start flocking to that one bank, creating a drain on the other banks. The banks that screw their best customers are cutting their own throats. The simple fact is, the banks are going to have to accept less profit for credit card operations, period. This bill is going to force the banks to be more agressive in courting customers, not less, by ordering transparency. The banks are simply crying wolf here trying to derail this bill, but at this point it (1:30PM Wednesday in D.C.) is a 100% chance of becoming law.
By jldour

5/20/09 at 10:36 a.m.

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Once again government action apparently will result in an unintended consequence. The federal government has a long track record of not effectively running a business. Their failures include Amtrack, US Postal Service, Freddie and Fannie, banks, insurance and so on. This is the government that many hope are going to give us health care for everyone? They get involved with credit cards and those of us who use them wisely are now going to be dinged to cover those who don't. I don't really care who is in power, all I know is less government is better.
By Future_2012

5/20/09 at 12:18 p.m.

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Pay cash
By kivew

5/20/09 at 10:11 p.m.

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hey, dour. does that include the US miitary? It is a Federal program, which you obviously didnt know. want less military? want to privatize the US Navy?