From Blue Jersey: Senator Menendez has asked the Department of the Treasury to “restrict credit card companies that receive taxpayer dollars from imposing unilateral interest rate increases and other consumer-unfriendly practices.”
Read the letter here.
Credit cards have always been the last refuge for banks and other lenders, the mechanism they can use to generate revenue when other streams have dried up. Revolving balances — the money you keep on your card — is a huge moneymaker, as FRONTLINE showed a few years ago, thanks to the elimination of “a critical restriction: the limit on the interest rate a lender can charge a borrower.”
Deregulation, coupled with a revolution in technology that enables the almost real-time tracking of personal financial information and the emergence of nationwide banking, has facilitated the widening availability of credit cards across the economic spectrum. But for some, the cost of credit is often far greater than it appears.
According to Harvard Law Professor Elizabeth Warren, the credit card companies are misleading consumers and making up their own rules. “These guys have figured out the best way to compete is to put a smiley face in your commercials, a low introductory rate, and hire a team of MBAs to lay traps in the fine print,” Warren tells FRONTLINE.
The fine print includes rate hikes that can be applied not only to future balances, but to existing balances, shifting due dates and unilaterally set late fees. The result is a tremendous hardship on people who have come to rely on their plastic.
Add to this the restrictions placed on bankruptcy under Clinton and you can see just how venal the system we have is.
So, kudos to Sen. Menendez, but let’s not view this as anything more than a minor correction — maybe a first step toward leveling the playing fields.
Hank Kalet 