Please answer one question for me – Why can’t politicians write laws that are easy to interpret?  Maybe it is because they don’t want them to be easy to interpret?  Maybe they want to keep it confusing?    

 

I think I have done something that not even all of the politicians have done prior to voting.  I have read over the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Cardholders Bill of Rights – the Senate had to rename it of course) and still am trying to make appropriate interpretations of some of these laws.  The bottom line is that the politicians give the industry plenty of wiggle room.  In other words, this appears to be nothing more than a slap on the hand.  With the exception of a few aspects of these laws, this is not a huge victory for the consumer.

 

As I will demonstrate over the next several days, this is one big victory for the credit card companies and not so much for the consumer.  Let’s take a look at a few facts.

 

There are two clear cut facts about this new legislation.  First, it will force the credit card company to make disclosures about credit more “suspicious” and readily available for consumers.  Second, it gets rid of the credit card company’s ability to increase interest rates for no reason.  This bill just defines how credit card companies can raise rates on you.

 

There are 3 major reasons why this is a victory for the credit card companies:

 

(1)     Gives the go ahead to raise fees – This is where the consumer is going to get hurt.  The credit card industry will just figure out ways to add more fees.  Now this adds up when you start thinking about the sheer number of cards in circulation.  Let’s take Chase for example. They have 119.4 million credit cards in circulation.  If they just started charging or increasing annual fees by $25, they would bring onto their balance sheet, either through an increase in money owed to them or fees paid by credit card holders, almost 3 billion dollars a year.  That is not bad for a hand slap.  They can easily get away with it now because of the new laws.

 

(2)     Bans the Universal Default Clause – Congress says credit card companies can no longer raise rates for any reason. They are claiming this to be a huge victory for the consumers and are declaring that they have hit the credit industry hard.  Actually, this is far from the truth.  The ability for the credit card industry to raise rates for any reason was going away regardless of these new laws. Realistically, there was a shelf life on how long they could get away with it.  The credit party is over.  Plus, they have 9 months to comply with the new laws (thanks to the Senate) and have plenty of time to raise rates and do whatever they want.  The House version of the bill only gave them 3 months to comply with the new laws.

 

(3)     They finally have Congress off of their back – The staged drama is over.  Congress has defeated the big bad credit industry.  Senator Dodd might have saved his political career.  Now, they don’t have to bother the industry that contributes heavily to their campaigns.  They did so without even having to inflict any real pain on the credit card industry.  This was political mastery.    

 

This is just another dog and pony show by our politicians.  Make no mistake about it – besides inconveniences, the credit industry wins on this one. The player with the biggest campaign contributions always wins in the fight for power and greed.

 

Tags: annual fees, Bob Brooks, Chase, Credit Card Accountability Responsibility and Disclosure Act of 2009, Credit Card Companies, credit card holders, Credit Cardholders Bill of Rights, Deceptive Money, Fees, House, politicians, Prudent Money, Senate, Senator Dodd, Universal Default Clause