New rules tighten reins on credit card companies
Associated Press photo
For the 19-year-old college student who uses plastic to pay for books and living expenses, the credit card overhaul passed by the House Wednesday is bad news.
For the salesman who works on commission and missed one payment after a bad month, the new rules offer protection against huge increases and some breathing room to rein in costs.
And for the credit card consumer who likes to pay bills over the phone, there will no longer be any penalty at all.
With President Barack Obama set to sign the , sweeping new credit card rules, the government has fundamentally shifted the relationship between the companies and their customers, especially those who carry debt from month to month.I'm a huge fan (of the new rules), I hate credit card companies, said Rachel Murphy, 27, of Red Hook, who has three credit cards and keeps a balance of about $3,000.
A few months ago, she said, one company tried to raise her interest rate but backed off when she threatened to cancel the card.
I don't want to say they prey on people because everybody knows what they're getting into, but it's similar to the way mortgage lenders made it too easy for people to borrow money, Murphy said.
The bill, which takes effect in nine months, imposes a slew of new restrictions on credit card companies, including a requirement that companies give 45 days notice before raising rates, a prohibition on rate hikes on existing balances unless they are 60 days overdue and the extension of the amount of time to pay bills to 21 days.
The companies would also have to be clearer about their interest rates and will not be allowed to raise rates on customers based on their payment histories with other types of credit.
Credit cards would not be available to those under 21 with no verifiable source of income unless a parent or spouse signs off on it.
This is going to make companies be more fair with people, said Paul Muwanga, 29, of Brooklyn. They're trying to make a profit but in the wrong way.
Critics of the bill fear that customers who pay up every month and don't carry debt may wind up getting hurt by the legislation with annual fees or reduced rewards programs.
Edward Yingling, CEO of the American Bankers Association, which lobbied against the legislation, said the rules limit companies' ability to price according to risk.
"Less credit will be available generally, which means some consumers and small businesses will not be able to obtain credit cards at all, particularly younger people and start-up small businesses," he said.
Garett Sloane and AP contributed to this story