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Card Sharps
Card SharpsCongress overwhelmingly passed and the president signed legislation last week that represents a major victory for American consumers.
Mirroring recent nearly identical actions taken by the Federal Reserve, the bill also underscores American's anger at companies that issue credit cards. It's one thing for the Fed to buck powerful lobbying interests so decisively; it's something else entirely for elected officials to do so.
There will be new restrictions on when and how card companies can increase the interest rate on balances you’ve already accrued.
Most importantly, the bill says that banks generally must wait until you’re 60 days late in making a minimum payment before applying a penalty interest rate to your existing debt. Pay on time for six months, and the lender is required to restore the previous, lower rate.
We have written here before about how self-defeating it is that credit companies now routinely raise interest rates to about 30 percent on delinquent accounts.
Self-defeating because they likely will not collect, at the same time that it is economically devastating on the companies' struggling clients.
Miss your payment by a day, and you might never recover your financial equilibrium. Seems a bit harsh.
How hard is it to miss a day? Not very.
The new bill requires that banks send out your bill no later than 21 days before the due date. And the due date will heretofore last until the close of the business day at 5 p.m.
Card companies have gotten notorious for billing you without leaving sufficient time to pay, then hitting you with a late fee and, if they are so inclined, with those unsustainable new interest rates. Many companies apparently also consider that the day the bill is due ends after the morning mail is delivered. That makes afternoon arrivals late, subject to the same outrageous punishments.
Card companies will be forced to apply payments to the highest-interest debt first, which are typically cash advances. They will be prohibited from slapping on a fee for willingly letting you exceed your credit limit, without first getting your permission to allow that to happen.
We are entirely pleased with our lawmakers' efforts to slap some sense into lending institutions that have grown so callous, ruthless and irresponsible.
We did a front-page story two weeks ago about banks' other fees, and the anger they have stirred in their own customers.
Lest you are wondering, we have nothing against banks. Indeed, we were particularly impressed by The Fauquier Bank's public airing of laundry last week, by the willingness of bank officials to meet with our reporters and by the candor with which they answered our questions.
We were impressed by the local institution's $20,000 loan to a fresh-faced new entrepreneur, which we reported in the same issue.
We have reported more than once on the development of Oak Hill National Bank, the new local bank which is scheduled to open in a matter of weeks.
"I think your story adds fuel to a fire that I’m suggesting could be contained by telling both sides [of the story] with the intent to help educate and inform," wrote an unhappy media relations official from one of the national banks mentioned in our story two weeks ago.
Adding fuel to the fire? Isn't that the point?
When banks — or any other institutions, for that matter — become so clearly in need of change that the Federal Reserve, Congress and the White House move in such concert, containing the blaze isn't in our best interest, nor in the best interest of our readers.
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