For years, credit card companies have increased interest rates and used small print in their contracts to boost revenues off the backs of consumers. In response, the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 went into effect in February 2010 in an attempt to put the brakes on credit card interest rates and cap so-called arbitrary hikes. But will consumers win out in the end?
Lenders have always found a way to create revenue. While Congress’ legislative efforts in regulating “usury”, lenders leapt on an end-around tactic to boost balance transfer fees and most likely will drop easy offers to consumers with less than excellent credit scores.
Regulations, Australia, and the Credit Card Industry
What may have caused an unbalance in the economy by quick and reckless lending may end up stabbing consumers in the back. You’ll find fees coming home to roost when you attempt to transfer balances to new credit cards. You can kiss seven to ten percent rates farewell!
If what happened in Australia six years ago is any indication how lenders react, merchants and consumers may be in for tough times. Down-under merchants complained about unfair interchange fees. Consequently the fees were sliced, but lenders battled back by eliminating rewards programs, increasing annual fees on Gold Cards, and reducing grace periods for applying interest on purchases. Ouch!
Caps may go a long way in slowing down profit-takers among the lenders, but when have you ever seen the balance shift in favor of debtors? If merchants inherit higher fees, won’t consumers pay in the end? In return, hard-hit consumers reeling from the economic downturn are cutting spending. It can snowball.
In the short term, caps may have made for a great beginning in reigning in gluttonous lenders, but somehow you can bet your borrowed dollar that we’re going to face the music.