Case No. 1: A man in Charlestown loses his job. He misses a mortgage payment, but is able to negotiate with his bank in order to get the payment deferred.
However, because his debt-to-income ratio changed, his credit card interest rate rose to more than 30 percent.
“The credit card company fought with me,” said Barbara Anderson, executive director of Haven House, a social services organization that advocated on the man’s behalf. “His credit was squeaky clean,” she said.
It was all for naught. The rate stayed high.
Case No. 2: An Indiana University Southeast freshman from Floyds Knobs gets a credit card in his name.
And the $2,000 he runs up collects so much interest that he has to drop out of school for a semester in order to make payments, explains Mary Jackey, a credit counselor with Consumer Credit Counseling Services, a nationwide agency.
More than ever, consumers need access to credit, she said.
“Unfortunately credit cards companies do not make it easy,” she said.
And though it’s a little late now, the consumers in both cases would have been aided by new credit card regulations signed into law by President Barack Obama a few days ago. The legislation doesn’t go into effect for nine months.
Members of Congress who helped pass it, joined by credit counselors such as Jackey, hail it as a victory for consumers who’ve been victimized by a credit and banking industry deprived of regulation.
“We really welcome this news,” said Jackey. “It actually protects consumers and helps keep the credit card companies honest.”
Though the legislation received overwhelming support in both the U.S. House of Representatives and the U.S. Senate, it came down to a single vote while in congressional committee.
Indiana Sen. Evan Bayh was among those in committee voting in favor of it.
“[The legislation] eliminates several of the most abusive practices,” Bayh said at a press conference in Jeffersonville on Friday afternoon. “The credit card companies have a right to make a profit, but they don’t have the right to do it by fooling people.”
Americans carry more than $950 billion in consumer revolving debt, according to one of the senator’s aides.
Bayh said the industry lobbied for that window so as to give time to make changes with computer systems. He said the federal government would be keeping an eye on companies that window to increase interest rates and fees on consumers before the law goes into effect.
“If they do that kind of thing, we’ll have to come back and revisit it,” he said. “Very few laws are perfect.”
He was unsure if the federal government had any legal recourse in order to do that, outside of legislation that addresses changes made during the nine-month window.
Reporters at the press event also brought up questions about higher annual fees and the availability of credit.
“They’re saying these kinds of things, but let’s see what happens,” Bayh answered. “It’s a competitive market.”
Marcia Sullivan, director of government relations for Consumer Bankers Association, a trade group, told USA Today for a recent article that the primary concern for banks is availability and price of credit.
“I think that every single company that offers a credit card is reassessing its cost,” Sullivan told USA Today. Issuers will be “reassessing what they do and how they do it.”
Once the law goes into effect, the Federal Reserve has the authority to oversee the industry and fine those not acting within the boundaries of the law.
“This has come to our attention because more and more people have gotten into trouble,” Bayh said. “Some of these unscrupulous practices come to light when times get bad.”
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