|by Jason Steele|
This is a historic day for consumers. Starting nine months from today, we will have the right to be treated in an honest, open, and fair manner by credit card issuing banks.
How We Got Here
The idea of a credit card bill of rights has been around for a long, long time, yet until this year, almost nothing was done about it. It is worth reviewing how the bill became a law.
History shows us that the 2008 elections were all about change.
Not to get partisan, but there was simply no chance of a Republican Congress passing this bill or George W. Bush supporting it, let alone signing it. Before Barack Obama became President, the bill never made it out of committee. It became law four months after he was inaugurated. If you like him or not, he deserves credit for pushing this through. Next time someone tells you that elections don’t matter, you can remind them of this bill.
The worldwide banking crisis stole the thunder from banks efforts to thwart this legislation.
It is very hard for the debt ridden banking industry to muster up the political power to defeat this at the moment when they are dependent on the government for their very survival. It is even harder for consumers to feel regularly taken advantage of by the very same institutions that their tax dollars are bailing out. The banks ran out of allies when they managed to upset both business and consumers at the same time. Business and consumers alike are faced with credit card fees and a lack of credit from banks. When Congress got around to acting, the banks had no one in their corner. The were left attempting to explain how consumer protections would hurt consumers. This argument completely lacked credibility.
Credit card companies were squeezing their best customers by jacking up interest rates and fees arbitrarily.
Many people do not have sympathy for customers facing high fees and interest rates when they don’t pay their bills. Everyone is outraged when banks slap those same fees and interest rates on those who always pay their bills on time. Upset those people, the strongest and most stable elements of our society, and you are guaranteeing defeat.
As your Reward Card Guru, I am keeping abreast of all the latest financial and travel news about how this new legislation will effect my reward card pastime. The predictions range from “the sky is falling” to “we won’t notice any difference” and everywhere in between. Over at the View From The Wing blog, Gary Leff has his own predictions that are on the optimistic side. Gary believes, as I do, that the reward card market will be largely unchanged. He explains how the economics of people like myself will not change at all. Frankly, most frequent travelers and reward card users pay little in fees or interest, yet they are still valuable customers, hence the reward. Gary goes on to say that those with weaker credit scores will face higher fees, interest rates, and so forth.
Where we differ is that he things that these people will be worse off with the bill. I disagree. I would rather the banks price their risk accordingly, either in higher interest rates or annual fees for those who represent greater risk. These people tend to be the most vulnerable to the “tricks and traps” method that the banks are currently engaged in. At least it is honest to tell someone that your lower credit score means that you will be charged an annual fee or a higher interest rate. It is dishonest to make payments due on weekends and holidays, bury obscure penalties in fine print, and punish customers for late transactions with other merchants.
It may be that the bar will be raised a bit higher for the best reward cards. It wouldn’t bother me much if you had to have very good credit to “earn” a fee free reward card. As I have said over and over again, these cards only make sense if you pay all of your bills in full and on time. If you have been doing that, reward cards should remain a worthwhile endeavor for some time to come.
Congratulations America, this is a triumph for consumer’s rights!