Under proposed legislation, credit card companies could no longer raise interest rates on balances a person has already built up.
Under proposed legislation, credit card companies could no longer raise interest rates on balances a person has already built up. iStockphoto.com
In tough economic times like these, a lot of people depend on their credit cards to survive. But doing so can come at a steep price. Consumer groups complain that a lot of credit card issuers charge hefty fees and exorbitantly high interest rates.
This week, congressional committees will consider legislation that would force the card companies to change the way they operate.
The legislation would bar a lot of practices that lawmakers say have hurt consumers. For instance, credit card companies could no longer raise interest rates on balances a person has already built up.
They could no longer raise interest rates just because a person has missed payments on some other card. And they would have to stop charging customers for making payments by phone or over the Internet.
"These practices destabilize the finances of American households, and Congress is stepping in and saying we have to help these households maintain some financial stability," says Travis Plunkett, legislative director for the Consumer Federation of America.
Many of these restrictions have already been enacted by the Federal Reserve and will take effect next year, but the congressional bills go even further and would establish the provisions as law.
Bill Himpler of the American Financial Services Association says the new regulations would make it much tougher for credit card companies to make money at a time when many of them have already pulled back on consumer lending.
"Taking credit options away from lenders that protect them against the risk of loss does stand a substantial chance of spooking the markets and thereby leading to a further tightening of credit," Himpler says.
Still, Himpler acknowledges that the political climate right now makes opposing the legislation more difficult. Consumer groups have been urging Congress to take on the credit card companies for some time. And with so much public anger being directed at the financial services industry, Democrats believe this is as good a time as any to get legislation passed.