With economic conditions taking a hit over the past several months, consumers found solace in credit cards, filling a financial void created by salary cuts, layoffs, skyrocketing bills, and unemployment. Credit card companies notably, upped the ante hiking interest rates along with other unfair practices that forced Capitol Hill to clamp down on the issuers.
In signing landmark legislation designed to protect consumers from abusive credit card practices late last month, President Barack Obama said, “with this bill, we’re putting in place some common-sense reforms designed to protect consumers.â€
This Credit Card Accountability Responsibility and Disclosure Act (CARD) legislation is “leading us away from credit card companies turning penalty fees and deceptive practices into a business model which is sort of what happened over the last 10 or 15 years,†said Austan Goolsbee, a senior White House economic advisor. Card issuers generated $15 billion in penalty fee income last year alone, he said. Most provisions of the new credit card bill will go into effect on Feb. 10, 2010. (Black Enterprise Credit Card Checklist)
About 91.1 million American household, or 78%, had at least one credit card at the end of 2008 and Americans’ credit card debt reached $972 billion during the same year. In the last 12 months, 15% of Americans, or nearly 34 million people, have been late making a credit card payment and 18 million people have missed a payment entirely.
Despite these troubling numbers, some caution the new law could backfire making credit cards more expensive or harder to obtain.
“[Major credit card companies] will probably start to charge annual fees which will allow them to recoup some of that revenue,†says Barron H. Harvey, dean at the Howard University School of Business. Companies are going to look for other means to derive revenue that are not covered in the new law, which mean card holders will need to be more vigilant in monitoring their issuer, Harvey explains. “If there’s a part of your bill or contract you don’t understand, you’re going to have to call and ask,†Harvey says.
See key components of the reform here.