Credit Cards And The Financial Reform Act

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The financial reform act has not been signed into law yet.   Nevertheless, it has come out of conference committee and will be voted on in the House and possibly filibustered in the Senate.   For the last week, there has Now that some time has passed since the compromise regarding credit card reform has been announced, some details are starting to emerge about how the bill will affect credit cards in particular.

Consumer Financial Protection Bureau

The idea behind this new agency is to consolidate the regulatory powers of many agencies that have some authority over consumer financial products.   This was originally designed to be the financial counterpart of the Consumer Product Safety Commission.   This new commission will have the authority to regulate credit cards on an ongoing basis.   This corrects a key fault in the CARD  Act, the fact that banks will continue to “innovate” new tricks and traps subsequent to many of their traditional abuses being abolished by CARD.   If this new agency works as designed, they will be able to ban unfair credit card industry practices as they are implemented, without an act of Congress.

Access To Your Credit Score

In the past, you could get a free copy of your credit report, but not the score.   With this new law, you would be entitled to the score if you have been the result of any negative action resulting from your score.  In practice, you will essentially be entitled to the score under almost any circumstance.   It has always been a mystery to me why these scores are kept secret.   It would seem to be in everyone’s interest that people monitor their credit score and actively try to improve it.    It looks like Congress is finally getting around to dragging the industry kicking and screaming into the future.

Swipe Fees

It seems the entire credit card industry as well as the reward card junkies like myself have dodged a bullet in that the new act will not directly curtail swipe fees in credit cards.

Merchant Acceptance Of Credit Cards

Unfortunately, there is a real threat to the status quo of no fee cards with cash back.    This bill specifically grants retailers the right to set a minimum purchase requirement of up to $10 for credit cards.   It also specifically grants merchants the ability to set discounts for cash or debit cards.     Technically, credit card companies have not forbid this in the past, but it was rarely used.   Occasionally you would see a gas station offer a small cash discount.    Based on past experiences, it will be interesting to see if cash discounts become commonplace.   I sincerely hope not, as any cash discount of over one percent will kill the value in just about any reward scenario while making transactions more confusing.

Sorting Out The Details

Ron Lieber of the New York Times has a fairly detailed article about how the bill relates to credit cards and other important aspects of this legislation.   As usual, he really cuts through the confusion that has surrounded this act and provides all the info that curious observers need to know.

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