Credit Card Legislation
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Large credit card issuers have been given relatively free rein in the past. That has now come to an end with recent legislation. Double cycle billing is now over. According to the American Banker, "The statute allows card companies to increase rates on existing balances only when a payment is 60 days or more late, a promotional rate expires, the rate is tied to a variable rate or the cardholder has entered a workout agreement." While I can understand how card holders are upset if they find their rates increased unilaterally, it also prohibits banks from repricing for risk when the financial circumstances of the card holder change. I can think of a reasonable compromise: a happy medium would be to allow limited rate increases on existing balances (say x% every 3 months) given certain well-defined changes such as a drop in FICO score of greater than y. This is unsecured credit, and if risk increases so should price. Mortgages, car loans, and HELOCs have a collateral to help banks recover some of their loans in worst case. Credit cards don't, so I think banks deserve A BIT, more flexibility. Credit cards shouldn't give banks carte blanche to double cycle bill, apply payments to the advantage of the bank, repeatedly charge overlimit fees for the same event. Look for similar Congressional action on NSF fees tied to debit cards. With the government bailing out the banks, citizens are feeling empowered to question some of the more egregious practices.