Credit card “bill of rights” puts few restraints on banks.
For several decades the credit card companies had used a range of aggressive and deceptive practices to lure large numbers of people into taking cards, tactics such as low “teaser” rates that would later be raised substantially and lavish campaigns on college campuses to snag financially unsophisticated students. However, now, as growing numbers of people have suffered economic difficulties due to the crisis, the banks have unilaterally reduced credit limits or closed accounts entirely based on “profiling” card holders, using presumed similarities to people who had defaulted on payments, even if the individual in question has given no indication of such difficulties.
The new legislation will, at best, dampen these practices only slightly. The bill’s main provisions include a prohibition on raising interest rates on existing balances unless payments are at least 60 days overdue and a requirement that credit card issuers give 45 days notice of increases in interest rates or other changes in an existing “agreement.” The bottom line is that interest rates and fees can still be raised, only a bit more slowly. For those already paying 20 percent or more such “restraints” will have little significance. Furthermore, as growing numbers of people lose their jobs or are hit in other ways by the economic crisis, the slight delays in the imposition of increasingly usurious terms by the banks will barely be noticeable.
The most significant change that could have been made, the imposition of a cap on interest rates and fees, was briefly floated by some Democrats, but quickly killed.
Senator Christopher Dodd, chairman of the Finance Committee and a major recipient of campaign contributions from the financial sector, is quoted by the Huffington Post as saying, "There used to be a time you could go to jail for charging rates like they charge today. Even organized crime would blanch at some of these fees. So there'll be a movement in that regard [capping interest rates and fees—WSWS]. There's [sic] obviously some legitimate arguments about opposing caps, and I'm listening to them, but frankly the overwhelming majority of people I talk to would like to see some limitation put on these rates." Senator Bernie Sanders of Vermont, who styles himself a “socialist,” proposed a 15 percent cap on credit card interest, the same as is currently in effect for credit unions. “When banks are charging 30 percent interest rates, they are not making credit available,” said Mr. Sanders. “They are engaged in loan sharking.” The amendment was overwhelmingly rejected, drawing only 33 votes of the 60 needed. In its report on the vote, the New York Times noted: “The banking industry, which had some heavyweight representatives monitoring the vote, warned that an interest rate limit could cause a sour reaction in the financial markets.” Presumably, senators who have counted on the financial services industry for a large share of their campaign contributions were conscious of the “heavyweights’” presence.
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