BlackEnterprise.com spoke with Goolsbee about how the credit card reform will affect consumers.
BlackEnterprise.com: What are some of the most important elements of this bill that can be immediately useful to consumers?
Austan Goolsbee: If [a card issuer] offers you a low introductory rate [for a new card], that rate has to remain for six months and they have to make totally clear what is going to happen to your interest rate over the course of the first year.
Additionally, credit card companies are not allowed to raise interest rates for balances you already incurred. Say something happens and you exceed your limit and they raise your rate. They apply that higher rate to balances you already had, [meaning] you already took out a loan but they just raise rate retroactively, that’s banned. Credit card companies have to give you at least 21 days to pay your bill, they can’t send you a bill three days before the due date.
[The bill] eliminates a series of relatively hard to explain practices that take advantage of customers like double billing cycle. If you have a balance that’s made up of low interest rate debt and high interest debt and you make a payment for part of it, [traditionally], credit card companies automatically pay down the lowest interest rate debt leaving you with the high interest rate debt. [Under the new law,] even if you make a partial payment they have to use it for your high interest rate debt first.
If a consumer thinks he or she has been a victim of predatory practices by credit card companies what is the best way to address the issue?
The bill is setting up a variety of accountability measures. There may be a toll free number consumers can call. If you’re having problems, you can contact the Federal Trade Commission, who is in the business of trying to prevent consumer fraud.
One problem we faced in the past is even when we passed certain rules, or laws, or regulations, if [companies] simply didn’t comply it was relatively hard to catch them and penalties were relatively modest. Means of enforcement now include higher penalties and regular reporting to supervisory agencies. It’s going to be partly tied in with the regulatory reform plan the government is coming out with in regards to consumer protection.