New rules adopted for credit cards
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Tess Vigeland: Chalk this one up for the little guy ? at least the one who plunks down plastic at the store. Today federal regulators approved new rules for the credit card industry. They’re meant to protect consumers from surprise interest rate hikes and fees, but banks say they’ll hurt card holders, whether they have good or bad credit. Marketplace’s Nancy Marshall Genzer explains.
Nancy Marshall Genzer: Dave Guttman pays his credit card bill off every month. But his bank keeps giving him less time to do it.
Dave Guttman: Time from the due date has shrunk from the normal 30 days to 20 billing days.
The new rules say credit card companies have to give consumers 21 days to pay. They can’t apply payments to high-interest debts last. And companies won’t be able to change the terms of your credit card based on your track record with other bills. Banks say as a result even people with good credit will pay higher rates because it will be harder to judge a person’s credit risk.
Scott Talbott: Those people who manage their credit well, will pay an interest rate that’s too high for their risk profile and that will in turn subsidize those borrowers who have trouble managing their credit.
That’s Scott Talbott of the Financial Services Roundtable. He says banks need more elastic rules for plastic. But Gail Hillebrand of Consumers Union says banks will use the new rules as an excuse to raise rates. And she doesn’t think the regulations do enough for borrowers in trouble. For example, low rates still skyrocket permanently if you’re late once, even if you mend your ways.
Gail Hillebrand: There’s no requirement that after you paid on time at the high rate for six months or 12 months, that you get your old rate back. So that’s unfinished business that needs to be addressed.
Unfinished business that Hillebrand says Congress can wrap up. Lawmakers could also speed things up. Right now, the new rules don’t go into effect until July of 2010.
In Washington, I’m Nancy Marshall Genzer for Marketplace.
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