Some good news for consumers, if not for credit card companies, may come as early as Thursday when the Federal Reserve will vote to approve 1,000 pages of new rules on the credit card industry. The rules also need approval from the Office of Thrift Supervision and the National Credit Union Administration.
One of the rules that could be changed would be the universal default law that allows credit card companies to hike up interest rates if the consumer defaults on other bills, utilities or even a gym membership. Another rule would prohibit the credit card company from raising fees or interest rates at will, unless the customer was 30 days behind on payments.
The credit card companies have said that the response will be to raise interest rates for all customers and to restrict the amount of lending. In different times, credit card companies sent out eight billion credit card applications a year in an attempt to get cards into people’s hands.
In the last decade there has been significant legislation to make it more difficult to declare bankruptcy.
“It’s you against an entire army of MBAs, whose job is to do nothing but maximize profits for the company,” said Elizabeth Warren, a Harvard Law Professor, on NPR. Warren related an account her law students trying to determine the interest rate from one credit card mailing. “It took 80 of them the better part of an hour working together to make sense of it. What’s the chance an ordinary customer is going to figure it out?”
That is, Warren said, the entire point. By agreeing to the terms of the credit card, the consumer has lost their ability to sue in a court of law, but instead must have the dispute mediated by an arbitration court. In those cases, the banks and credit card companies win 94 percent of the time, said Citizen Union, an organization that aggregated the data.