Federal regulations for credit cards clear first hurdle
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Consumer advocates are hopeful while the financial institutions are ready for a fight.
The House Services Committee has cleared the first hurdle towards establishing a federal agency to regulate financial services. But be prepared for your banks and credit card companies to strike while they can.
Consumers are reporting an increase in such examples right now, with the new Credit Card Act set take effect February 22nd.
By a vote of 39 to 29, the Senate Financial Services Committee is moving forward with plans to establish a Consumer Financial Protection Agency.
The committee is also trying to move up the start date for new credit card regulations to have them take effect Dec. 1 instead of next February.
Credit card companies are using the grace period to fill the revenue gap caused by growing delinquencies and record defaults.
According to Bill Hardekopf, CEO of LowCards.com, the percentage of accounts where payments are overdue by at least one month, went up for five of the six top credit card companies between August and September. Some companies report default rates as high as 14.25 percent.
Other industry watchers say even with relatively stable interests rates in the market place, the high unemployment rate signals the high potential for continued bank card industry losses.
"That's why you see them aggressively cutting credit limits, even closing out credit cards for consumers that either haven't used the card in a while, or represent the potential for default down the road," said Greg McBride, senior analyst at Bankrate.com.
\With the holiday shopping season already underway, the aggressive tactics could catch you off guard and create havoc with your personal finances.
Here's what to look for:
*Lower credit limits with little or no warning
*Suddenly higher interest rates, as high as 29.99 percent even if you've paid on time
*New annual fees, as high as 99 dollars a year
* Higher cash advance and balance transfer fees
*Reduced or canceled credit card reward programs
*Canceled credit cards
What can you do about it?
If you have excellent credit, shop around and try to negotiate a better deal. Then pay off your balance as quickly as possible.
"The reality check consumers need to have however, is if you're struggling to make your payments on time, if you're making minimum payments, or if you carry a very large balance, you don't have much negotiating power in terms of negotiating better terms with your current issuer or switching to another," said McBride.
The measure to expedite the start of the credit card act would not apply to companies with fewer than two million cards in circulation. There's no word on when that amendment will be considered by the full House.
The bill to regulate the financial industry should move to the full House in the next couple of weeks, then face a tough battle in the Senate next year.
The House Services Committee has cleared the first hurdle towards establishing a federal agency to regulate financial services. But be prepared for your banks and credit card companies to strike while they can.
Consumers are reporting an increase in such examples right now, with the new Credit Card Act set take effect February 22nd.
By a vote of 39 to 29, the Senate Financial Services Committee is moving forward with plans to establish a Consumer Financial Protection Agency.
The committee is also trying to move up the start date for new credit card regulations to have them take effect Dec. 1 instead of next February.
Credit card companies are using the grace period to fill the revenue gap caused by growing delinquencies and record defaults.
According to Bill Hardekopf, CEO of LowCards.com, the percentage of accounts where payments are overdue by at least one month, went up for five of the six top credit card companies between August and September. Some companies report default rates as high as 14.25 percent.
Other industry watchers say even with relatively stable interests rates in the market place, the high unemployment rate signals the high potential for continued bank card industry losses.
"That's why you see them aggressively cutting credit limits, even closing out credit cards for consumers that either haven't used the card in a while, or represent the potential for default down the road," said Greg McBride, senior analyst at Bankrate.com.
\With the holiday shopping season already underway, the aggressive tactics could catch you off guard and create havoc with your personal finances.
Here's what to look for:
*Lower credit limits with little or no warning
*Suddenly higher interest rates, as high as 29.99 percent even if you've paid on time
*New annual fees, as high as 99 dollars a year
* Higher cash advance and balance transfer fees
*Reduced or canceled credit card reward programs
*Canceled credit cards
What can you do about it?
If you have excellent credit, shop around and try to negotiate a better deal. Then pay off your balance as quickly as possible.
"The reality check consumers need to have however, is if you're struggling to make your payments on time, if you're making minimum payments, or if you carry a very large balance, you don't have much negotiating power in terms of negotiating better terms with your current issuer or switching to another," said McBride.
The measure to expedite the start of the credit card act would not apply to companies with fewer than two million cards in circulation. There's no word on when that amendment will be considered by the full House.
The bill to regulate the financial industry should move to the full House in the next couple of weeks, then face a tough battle in the Senate next year.
