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Credit Cards: Regulate the Rates

Via the Credit Cardholders’ Bill of Rights, the U.S. should regulate the industry to protect consumers from sudden rate increases such as those recently imposed by Bank of America, which more than doubled rates for certain cardholders. Pro or con?

Pro: Fine Print Is Useless

The recent instances of credit card companies raising interest rates without apparent reason and then offering cardholders a tiny window within which to repay at the old rate are a perfect example of why disclosure is a flawed paradigm for consumer protection.

For more than 50 years, we have assumed if consumers were made aware of their loan terms (however onerous and convoluted), they could make informed decisions. Disclosure was a way of saying: Caveat emptor.

But disclosure alone is inadequate, especially in cases where responsible cardholders unexpectedly have their rates raised significantly—going, for example, from 11% to 24% annually. We erroneously assume consumers read, understand, and act on the explanation of credit card terms they receive. Many consumers, even those who read what they receive, do not fully understand the disclosures, which are often in small print or legalese. In addition, what drives consumer decision-making is not always rational choice: Mood, emotion, and fiscal reality influence choice. That is precisely why we have federally mandated cooling-off periods for door to door sales.

We must look beyond disclosure for consumer protection. If the subprime lending crisis teaches us anything, it is that disclosure is simply not enough. We need to look to increased regulation to protect consumers, most particularly those who are vulnerable.

The recently introduced Credit Cardholders’ Bill of Rights (H.R. 5244) provides a good starting point, but we can do more. Many consumers cannot navigate the consumer financial marketplace; they cannot substitute one card for another on short notice and repay outstanding balances in one fell swoop (even over several months).

What we need is clear prohibitions that curb certain credit card lending practices, such as unjustified significant rate increases. We also need to make sure there are strong remedies for breaches—including subjecting credit card companies to monetary penalties, loan cancellation, and private causes of action (including class actions), establishing greater protection of states’ rights.

Disclosure is but one facet of an approach that must include legislation with real teeth. Only then will the term “consumer protection” have real meaning.

Con: Regulation Accomplishes Nothing Positive

The burdensome, patronizing, new credit card regulations proposed in the wildly misnamed “Credit Cardholders Bill of Rights” will hurt just about every type of U.S. consumer.

Indeed, the new restrictions that self-styled “consumer advocates” and their trial lawyer allies envision will result in immediate, sizeable interest rate and fee increases for the majority of Americans who pay their credit card bills on time. Quite simply, efforts to cap, reduce, and ban penalty fees and interest-rate hikes for bad customers will axiomatically lead profit-minded companies to seek returns elsewhere. Many will hike the annual fees and interest rates for everyone else. New ways to litigate likewise will create another lawyers’ payday while doing nothing to help ordinary Americans.

Those who live on limited incomes or fail to pay their bills on time—the supposed beneficiaries of the proposals—will also see themselves hurt. Many will be denied credit that bureaucrats decide they “can’t afford.” More will find they only qualify for the “secured credit cards”—which require a bank deposit against the credit line—that predominated in the dark days before deregulation helped banks figure out ways to extend credit to everyone.

In fact, the current credit card regulatory system serves consumers pretty well. Although hardly anybody reads through the dense fine-print agreements that come with credit cards, the mandatory easy-to-read disclosures of interest rates, penalties, and fees already give consumers a simple repository of information. The widespread availability of balance transfers—an option on nearly all non-merchant-branded consumer credit cards—helps consumers “repay outstanding balances in one fell swoop” and transfer money away from card issuers whose policies they don’t like.

Of course, the situation isn’t copacetic. Credit card agreements remain difficult to navigate, and many consumers find card issuers unfriendly. A drastic simplification of current regulations could eliminate a lot of the difficult fine print. Decreased regulation of credit card issuers, likewise, could let them find more creative ways to serve consumers’ needs. In short, we need less regulation, not more.

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of BusinessWeek,, or The McGraw-Hill Companies.

Reader Comments


Credit card companies have proved they cannot be left alone to do as they please. Loan shark interest rates are the least of my worries. Ever-changing cardholder agreements, sudden fees, poor fraud investigation, and tricking you by changing the billing dates so you miss a payment are just some of the tricks of these crooks. My still ongoing experience with Capital One (for fraud) amply demonstrates that credit card companies are very fast to send you a credit card but oh so slow to deal with problems. There should be a law that if they want to change the cardholder agreement, then they must issue a new credit card with the consumer having the choice to either accept or reject this new card without it affecting the credit rating. As soon as I redeemed my mileage points on a Chase Card, they slapped on fee after fee. So I have a mileage card with no mileage courtesy of Chase. Bank of America tried to put fees on a basic card for God's sake. Can American companies make money without resorting to trickery anymore? I guess not as the biggest crooks on Wall Street have proved with subprime mortgages. I lived in Hong Kong, and I never saw this kind shoddy business practice. They actually innovated to make money instead of fleecing consumers. I hope they burn in hell for what they have done to me.


I worked for an insurance company that did business in California a while ago. There was an earthquake, and some big companies went under because of their exposure, while a lot of homeowners never bothered to confirm that earthquake was not covered. The California legislature came to the rescue, to uphold the rights of the "little guy" and teach those "greedy" insurance companies that despite the financial risk of going bankrupt for insurance companies, they would make earthquake coverage mandatory. What happened? The insurance companies stopped issuing new policies and did not renew existing ones. Then no one had insurance, but still had mortgages that required insurance. I see the same thing here, and have to go with "Con." Yes, there is some cleanup required, but any law like this one seems to assume that companies have to issue credit cards, new law or not, like they used to. Just like California assumed insurance companies would still issue policies like they used to with the mandatory earthquake coverage. So ask yourself, do you want your credit cards as they are now, or not have any at all?

James D

It's not that difficult, folks. The laws exist, and the practices are already established to address credit consumers' rights. A credit card issuer has contracted with me to provide credit for a certain price--the APR. I engage in the contract and borrow $5,000 at 10% APR. Contract law stipulates that I repay the loan at the agreed-upon rate over the agreed-upon term. Period. The issuer originated funds at the time I took out the $5,000 at a certain rate and paid the merchants from whom I obtained the goods and services at that time. Hopefully, they have a profit margin so they can continue in business. If the issuer now finds it more advantageous to charge a higher interest rate for additional funds, over and above the original $5,000, they tell me the new rate and I decide if I want to participate or not. It's not high science. If we elect to excuse certain interests from the terms and conditions of contract law to our detriment, then we should stop the snivel and continue walking around with our hands on our ankles. When the swift kick arrives, it should not come as such a surprise. The remedy to all this should be obvious.

Diligent Dave

When Congress, some years ago, starting investigating credit card companies, First Cards (which was acquired by Bank One, which now is part of JP Morgan/Chase), lowered our rates, even sent us chocolates for Christmas. As soon, however, that the heat was on, they jacked up rates sky high.

Household Credit, once, when I made a payment by phone, messed up, and the payment wasn't made, triggering a late fee and high interest rates.

Citibank and Morgan Stanley, after they signed deals a few years ago to pay fines for their roles in the Enron scandal, immediately afterward jacked up rates sky high (Morgan Stanley did on Discover Card cards, when they still owned that institution). Pay a fine, pass it along elsewhere.

There is not a single issuer of credit cards that I trust. MBNA cards, which now is Bank of America, use to be the fairest in many ways. Their rates were in our case, among the lowest. Now that they are trying to build up their cash reserves, they are doing it with sky high rates (allowing them to collect big money on credit card interest rates, or get their principal back by pushing cardholders to pay off cards and take their debt elsewhere).

"Rape and pillage" worked better for these banking institutions when the overall economy was doing better. Now that most of it is sagging, "rape and pillage" (for Bank of America at least), and some others, is resorted to once again.

The "subprime" lending was largely intended to benefit from people they knew likely would slip in payments. Miss a payment, the whole amount comes due, and we foreclose and make money on the appreciation value of the house.

It has not been lost on me that some institutions still bear the name of the robber barons of a century or more are still on them, like JP Morgan.

These institutions today grind the face of the poor. And, if you are not yet totally poor, their policies and practices will make you that way.

Sure, regulating can have bad unintended consequences. But not regulating may have equal and possibly even greater intended consequences.

Gimme a BREAK

Jimi Hendrix asked, "Are you experienced?" I'm asking, "Are you delusional?" Congress gets so much money and so many free corporate jet rides and swanky free meals that you believe they will bite the hand that feeds them so very well? Illegal wiretaps, now DNA swabs, no meaningful regulation of cable or telephone or airlines or drug companies, none on Pig Oil (no typo), and Congress would upset their personal gravy boat, because...they're patriotic? They care about working Americans? They love children and dogs? Gimme a break. Or go have yourself committed to the psychiatric hospital for endless observation and treatment. Oh, take the voters and nonvoters with you.


Folks, let me make a suggestion: If you don't already belong to a credit union, join one. In most cases, they are local institutions and you're dealing with local individuals when you pick up the phone to call them. Credit union credit cards tend to have the fairest terms when it comes to APR and fees.


Let me add to my previous comments. I am the first one to agree that too much regulation kills business, but the problem is that current regulation (through lobbyists) have been written to protect the credit card companies. This is what I object to. For example, if you change credit cards often because you don't want to accept their new rates or terms and conditions, then it affects your credit rating negatively. The credit card companies use this fear as leverage to change terms at will. So Mr. Rocket Science and Mr. Earthquake, your arguments don't fly. After all, even I can get the village idiot (there are many idiots in America through no fault of their own) to sign a piece of paper that gives me everything he or she has. Does that make it right? Is it ethical? Morally right? I don't think so. It's all about education and credit card companies' screwing the consumer with legalese. As for the fear that many people will not be able to get credit cards, maybe that is a good thing. For far too long people in this country have lived beyond their means like drug addicts, and the crash is coming soon. If we leave the credit card companies to their own devices, they will do what the bankers did with subprime mortgages, and the tax payers will have to bail them out, too. Is that why Visa was floated on the stock market recently? Mark my words, the losses are piling up in the card industry and it is matter of time before a mortgage-style fiasco is going to ensue. If we can outlaw loan sharks, we can outlaw bad credit card practices.


This type of legal extortion only happens in the U.S. This problem is everywhere, not just with the credit card industry. Everywhere you go, you will see fine print. Just look at how many documents you have to sign when buying a house or a car or just applying for an Internet service. Do we the general public really read and understand what they wrote in those documents?

Why do they need to have such a small font even for online forms? It doesn't make any sense.

I've never seen this type of trickery in other cultures when I was working overseas.


USAA Federal Savings Bank in Texas might offer one of the few fair credit cards around. They are only available for the military. That is fortunate because Uncle Sam doesn't take great care of veterans last time I checked.

I think regulation is generally bad, because it costs taxpayers money and creates inefficiencies. However, if like AD says, the current laws favor banks, then we need some kind of fix. I believe in consumer accountability for unwise spending, but we can't let banks unfairly take advantage of consumers.

Maybe one of the rich tycoons in the USA, like Oprah, should start Fair Bank USA. That gives me an idea--I need to squat that domain name, gotta go.

American Sharecropper

"There outta be a law!" The hallmark of tyrants for generations. The Credit card industry is as crooked as our Congress, and we have no one to blame but ourselves. Passing more national laws will do nothing to help the consumer. They never do. Our esteemed elitist representatives enact legislation with fancy titles but little in the way of substance. We have a myriad of current federal law, credit card companies have a myriad of in-house lawyers who manipulate existing laws to their advantage, and lobbyists who throw buckets of money to our crooked representatives to write law that benefits corporations at our expense. As long as we continue to vote for the existing "two party" (read two sides of the same party), we will continue to get the current level of corruption from our government. Our problem cannot and will not be solved by Congress' creating more laws. It will only be solved by a national movement to return our government to its lawful, Constitutional status.

You cannot simultaneously demand your government ignore the Constitution when it benefits you, and then expect it to work toward your liberty. You have no one to blame but yourself. This is a state issue; states used to look out for the welfare of their constituents by enacting usury laws. The federal government overrode many of those laws, and you cheered them on. You hailed the federal government when Congress passed the FCRA, ECOA, FCBA, and the EFTA--each of them with high minded goals and consumer friendly intentions, each of them used by credit card companies to extract as much money as possible from consumers by fraud and in some cases, governmental force. When Congress recently updated the bankruptcy laws (can't blame either side; it couldn't have passed without both sides cooperating), the credit card industry was instrumental in writing much of it. To the detriment of the nation, it was signed it into law with little fanfare, and you did nothing.

"Caveat Emptor" is meaningless when the fine print is so convoluted as to be unreadable. Taking its cue from the federal tax code, credit card companies have skirted full disclosure laws by making the fine print so complicated only a seasoned attorney could make sense of them. Do yourself a favor: Cut up your credit cards and learn to live without credit. I have no credit, pay no interest, and I have enough money to purchase whatever I want, whenever I want, by simply not playing the game.

Uncle Fuzzy

All banks and credit card companies purposely make the fine print so utterly confusing that you'll surely make some very simple mistake in the future that will cost you $20 or more when you accept their products, such as free checking accounts (almost all of these are not free) and credit cards and cash advances and money transfers to and from different banks. Do your best to stay away from banks and any so-called services that they may offer you. Banking reform is needed in America and also worldwide as well. But don't hold your breath until it happens, because the banking industry controls the entire world's finances. Do a Google search for the key words "Money Masters," and watch the video. You'll never be the same after watching this one. Have a marvelous day.
Uncle Fuzzy
P.S. Also, you may read about these money changers as far back in recorded history as you would like to go. They were doing their dirty deeds back then, too.

Wet Cranky Monkey

Uncle Fuzz makes a good point; if you don't like the terms, don't come out to play. Just as banks are not required to issue credit to anybody, we are not required to carry their loan-shark products. Vote with your pen and your pocketbook. The easiest and cheapest cure for this entire industry problem is not carrying a credit card.

I think government absolutely should regulate the industry with respect to consumer privacy protection and fraud liability. These are two areas where the consumer would have little control if the industry decided to trample us. But government has no business regulating terms, fees, maximum rate caps, credit limits, etc. That is for the free market. I personally will never carry a card that charges any kind of fee (annual or otherwise), I almost always pay in full each month, and if I do carry a balance the card must not charge more than 9.9% interest. I also refuse to carry a card if I don't earn airline miles or get some type of cash back reward. If every consumer adopted these criteria before accepting a card, how long do you think it would take banks to ante up to the terms? Not long, thanks to the free market. Problem is, most consumers are not very financially disciplined, the banks know it, and the pendulum swings in the banks' favor allowing them to push whatever terms they please.

I know there are some very shady card companies in this country that like to prey on the unwitting; HSBC and Capital One come to mind. And if BofA now falls into that category, I include them, too. The point is, none of these sheister companies would make a dime if people didn't flock to sign up for their cards with every junk mail piece that hits their mailboxes.


Let me add to the list of those to avoid: GM Master Card, which is handled by HSBC Card Services. A late payment (sent via electronic bank payment) was not posted until the day after it was due, and 10.9% went immediately to 30.9%. And they will not even consider lowering the amount. One of the people I talked to actually encouraged me to default on the amount, and to add insult to great financial injury, the calls go to Calcutta, India. That's right, folks. HSBC outsources to India, and that costs American jobs. I have been with GM since 1995--never missed a payment, not even once. So much for consumer loyalty. Will I ever buy another GM product? Oh, no. Will I encourage others to buy anything except GM products? Oh yeah. Will I do what my folks did when the banks failed and the country went into a depression? Maybe so. And while they didn't exactly cheer, they came pretty close to doing so.


Thanks, BJ and Uncle Fuzzy. I nearly got a HSBC credit card, because my experience with HSBC when I lived in Hong Kong and Canada were very good. However, I can now see even HSBC is playing the crooked game here in the U.S., using laws that are favorable to banks. How come they don't do this crap in Hong Kong? Very simple: very effective laws that protect the consumer. You would have thought the laws would be the best in the U.S., but it's looking more like the wild wild West here. Shouldn't there be a law that says free means free without any terms and conditions? Maybe somebody could sue the banks for false representation. Just wish there was a chap with a few million to spare who could sue the hell out of these banks on our behalf. Hey, maybe we could do a reality show out of it? In the meantime, I am thinking of doing some youtube videos to expose these criminals, using their own advertising gimmicks. Should be fun.

P.S. My list of cards to avoid:
- Capital One (False charges and incompetent fraud investigation department).
- Chase (Charges for a free travel rewards card as soon as you redeem your mileage points).
- Bank of America (Issues you a new card with the cooperation of tellers plus loses your data and has to issue new cards with different terms).
- HSBC (false late payment fees).


To their sorrow, just stick it to them.


Add Providian to the list of don't-get cards. To our dismay, we were informed our rates were increased from our low rate to more than 21%, not because of default, not because of minimum payment, not by any default on anything we own. In fact, we always paid almost double on our credit card balances when we received a bill. Their excuse was high risk? Nothing more. Now if I pay a credit card, it's always more than minimum balance when due, never late on any payments. How can you call it high risk? The only high risk is getting their cards


In over your head? Declare bankruptcy (yes, it is still possible), get a fresh start and don't get a new credit card. Learn to live life by using cash and checks for a while. Credit cards are like crack. Once you're hooked, it's tough to get off that ride.


The idea that consumers don't read and don't consider the ramifications of the contracts they enter with credit card companies does indeed seem patronizing, and the new law based around the idea that consumers aren't going to make the best decisions for themselves without a government agency stepping in to regulate their choices seems to create the ripe conditions for problem after problem as corporations, consumers, and the government battle for mutually agreeable credit terms. Not to mention invite rebellion for those of us who are sure we can make better decisions than a government-appointed custodian of our financial lives.

Disclosure isn't just a way of saying "caveat emptor," because it's federally mandated and carries the weight of a legal contract on both ends. If you violate the terms of your agreement with me, I as a consumer can drag you into court and demand restitution. The idea of disclosure as the governing piece of credit card agreements is fundamentally sound. The problem is what the terms are and how transparent the creditors make them. Just like the Schumer Box on any credit card offer and contract gives consumers a quick, at a glance overview of basic terms and conditions, so, too, should the rest of the service agreements be laid out in a short and straightforward way.

Forced briefness would make gotchas and dirty tricks much easier to spot. It would also give consumers a better way to get educated and give them more power with this newfound knowledge. Finally, rather than allowing credit card companies to arbitrarily jack up their interest rates for any reason at all as their standard legal boilerplates allow them to do now, a new standard for clear and comprehensive disclosure should make creditors spell out in what events your rate will be altered and by how much. Empowered consumers would get pickier, creditors would need to make better decisions in lending and marketing, and their disclosure of how and why interest rates would fluctuate would provide their customers with powerful tools to help keep themselves financially solvent.

Rather than reaching for the kid gloves or claiming that one side of the problem is wholly innocent, we should identify the biggest issue (in this case, enormous, obtuse, and dynamic service agreements) and remedy it with transparency, clarity, and education.

Dr. Serendipitous

The easy availability of credit has been the biggest culprit in the near zero saving rate of Americans. People, instead of saving money to buy things, are being encouraged to buy on credit, then pay for the purchases that would end up costing them much more in the long run with the added interest. This addictive habit formed by easy credit that is being peddled by banks not only hurts the consumers but also endangers our national interests since, with America's near zero saving rate, we have to borrow from the saving conscious foreigners, such as the Chinese and Japanese, to prop up our deficit-laden government.

The easy availability of credit put more people in debt and allowed credit card lenders to prosper on the late charges and other punitive add-ons that would not have been possible if the borderline credit risks were not allowed on board on this scheme designed to milk people who can least afford to borrow. Stop easy credit--it's about time that we learn to save again.


What is Eli Lehrer smoking?

Balance transfers are charged at 3% (some don't even cap the charge either), so how does that possibly "help consumers 'repay outstanding balances in one fell swoop' and transfer money away from card issuers whose policies they don’t like."

Also if all the card issuers are gouging us in the same way (i.e., price fixing), how can you get away from a card issuer you don't like?

I'm not against tightening credit standards, but responsible credit card holders shouldn't be penalized at the credit card companies' whim.

I've never had a late credit card payment and yet my interest rates is 17%, while the banks get federal money at 2%.

I pay off my credit card in full every month; my credit score is 840. And yet all the credit cards I have and the offers I've seen charge more than 15% interest. What choice do I have? None.

Independent American

Credit cards are a powerful tool when used appropriately. Unfortunately, many people do not use credit cards as they ought to use them. The key to solving any credit problem is education, not regulation.

MasterCard, Visa, Discover, etc. can protect you against merchant breach of contract if you use your charge back rights. You might not always get ideal customer service when disputing a charge--depending on your bank--but at least you have something. When you pay cash or use a check, all you've got is small claims court when a merchant does not deliver as promised on a good or service.

Like any other tool, credit cards are neither evil nor good, but neutral. It depends on how you use the card, not on the card itself. A skilled lumberjack can use a chain saw to cut down a sick tree in your yard before a hurricane blows it down. A klutz with the same tool might cut off his hand instead. Does this mean chainsaws need to be regulated?

Credit cards are unsecured debt, which will quickly bury you if you are not careful with your finances. Yes, many people allow their debt-to-income ratio to get out of hand. But freedom is about the ability to make wrong choices. You don't really have freedom if you can't mess up. Otherwise we might as well be kindergartners running around with the non-pointy scissors that don't do the job but at least nobody gets hurt.

Life has risk, and buying things you cannot afford on credit is the same as gambling. Maybe that means we should get government approval before we go shopping, but I prefer making my own choices.

Bal Ancedview

Visa and the cards hide the fact that they charge 2.5% on foreign currency transactions in their fine print agreements. If people were made aware on their statements, no doubt business or the fees would come down.

Also charging merchants 2% to 3% on purchases bears no relation to the electronic transmission service being provided. It's gouging. Take a look at some things Australia has done to combat this. Merchants need to unite and revolt against the cards.


I feel very sorry for regular Americans who find themselves slaves to credit card companies, health insurance companies, cable companies, and cell phone companies. And all the fine print that comes along the way. I wonder if the Constitution has a fine print, too. It seems like it does to me. The land of freedom? Freedom from what? The land of slaves? Sounds more like truth.

Deepka Das

Just see the double standards:

When banks are about to fail due to credit crunch, the Federal Reserve jumps in with cash, lower interest rates, and anything to ensure their survival.

When a small business or an individual is having difficulty, the crooked BOA doubles your interest rates, levies fines, etc. It does all it can to run you in the ground.

Where is the justice for the little guy? All they want to do is crush you "cause it is in their contract."

It's time the U.S. government or the Federal Reserve crushed the smug crooks at BOA, too, in the same fashion as they do with the little guys.

But I know nothing will happen as even the populist Obama is on the side of the banks and credit card companies as he sponsored the 300% APR bill for campaign contributions.

Ninety percent of politicians in Washington are liars and crooks, so expect no change.

Jon Miller

Not sure really what the argument here is. It's a simple lesson that far too many Americans are unaware of or don't want to learn: Do not buy anything if you don't have the cash to pay for it. As far as the major credit card companies charging you a rate that they deem appropriate, you are consenting to pay that rate if you take the card and buy something you can't afford. You are in debt. If you don't want to pay exorbitant rates, then don't get into debt. View the credit companies as loan sharks, and if you don't pay them you will end up in financial ruin, or worse off then you were before. All this is, is taking responsibility for your weakness and your inability to wait until you have money to consume. As far as the government stepping in to stop rates from resetting, that stinks of moral hazard and is no different than the housing bailout for the same people who didn't want to take some responsibility in life to stand up and say, "I cannot afford this." Blaming your problems on paperwork and your inability to understand is a joke. If you can't understand something when you read it, don't sign it or agree to it. Seek answers, people.

Doug Bell

Tracking the disclosures is especially burdensome because of the frequent amendments and changes in terms. To piece together current terms on a credit card requires starting from the initial disclosure and then successively applying the amendments. I think any reform must also require the credit card companies to include a complete set of terms along with the current set of changes. This way, at least you can keep up with the terms of your agreement if you are so inclined.


I have a radical idea: How about not extending lots of credit to everyone and thus teaching people to live on their actual incomes, preventing mass debt from piling up and encouraging people to buy things that, in all honesty, they cannot afford? I live abroad in Switzerland, and one of my first big shockers came with my first credit card application: refused. I had to wait six months and apply again; this time I was accepted as I had found a job with a regular salary. But I still pay $200 a year (yes folks, that's right, $200) for the privilege of having a credit card. None of my friends have credit cards, and they scrape by with what they have, learning to live on a budget. I go for the pro side of things here, as credit card companies are more than happy to give you a $3,500 limit right out of college (with no annual fees but all sorts of hidden charges) when you don't even have a job yet. How does that make sense? Of course those kids are going to rack up debt right away. Can someone explain to me how that is not taking advantage of uninformed consumers? Lose the attachment to plastic, and get back in charge of your money--you did earn it after all.


It is about time that the credit card companies and their massive profits are cut into. Consumers need protection. These practices hurt our economy by leading to the defaults the credit card companies claim they are trying to offset.

My daughter in college with no current job has been offered six credit cards in 30 days. The one card offer she did take a few months ago with a $1,000 credit limit has never had a balance larger than $300, yet she was just notified that her limit was raised after four months to $5,500 That is ridiculous.


I do all my banking with Washington Mutual--checking, direct deposit, mortgage, mutual funds, and credit card (originally it was a Providian Card, but coincidental WaMu bought them out). It had been a 17% rate interest card on my balance of about $5,000.

Well, Washington Mutual loses tens of billions of dollars with their subprime mortgage lending. To make up some of their losses, they look to their profitable credit card division. Next thing I know, my interest rate is increased to 25.9%.

I have called Washington Mutual many times to question this situation, and all I get is someone in India or the Philippines telling me that "25.9% is your interest rate. Is there anything else I may help you with?"

Needless to say, I am paying it off quicker than I would normally have (thank you, WaMu) and when I do, it's going to be bye-bye, Washington Mutual credit card--and my all my business with them as well. Of course, rumor has it that they may be gone before I pay off my card. LOL.


What's needed is not more regulation but education and discipline.

Increasing credit card regulation will only mean that people will be forced into more desperate circumstances and start using less regulated payroll and auto-title loans or even underground to loan sharks.

More regulation at this time of tightening credit will only prolong the economic downturn and force more people into bankruptcy.

A few things that can be done with relatively little effort and cost:

1) Plain English disclosures. Terms and conditions should be written so someone with a high school education can easily understand what they are getting themselves into.

2) Consumer information provided by the government. The UK has figured this out (, so why can't we?

3) Set caps on credit for lower income earners. As much as I hate market intervention, some people shouldn't be allowed to use credit cards, i.e., the people who have trouble paying rent but want a 50-inch TV.


Having the availability of instant credit is a great benefit to everyone that helps the economy and helps all of us when we need access to cash that is not in the budget. But as consumers, we must realize it is our responsibility to assume there is no free lunch and there are charges and fees we might not like or agree with, but trying to regulate them out makes it harder for companies to recover their hidden costs like fraud, defaults, and managing late-payers.

If you don't like a service, vote with your feet and cancel, transfer, or stop whining. There is probably room for a simplified summary of the contracts, but that is not an excuse for not reading or asking questions.


Occasionally bad things happen to good people--and not by any fault of their own. Right now, if a small business owner decides to pay his employees before making a car payment on his truck, credit card companies that have nothing to do with the car lender can double this person's interest rates. Not even back-alley thugs would do that. Can you imagine a bookie on the east side doubling your "vic" because you paid some guy in Vegas late? Never would happen. Because I guess back-alley thugs, though criminal, do have some morals after all.

So yeah, I say credit lenders should at least be held to the same standard as back-ally thugs, gamblers, and bookies. Call it "more regulations that hinder business," if you like, but I call it common sense.

By the way, I'll mourn the tiny nick to credit profits of $30 billion per year in the U.S. deeply.

Tom Masters

The credit industry needs no more regulation than is imposed on other instructions like big oil and the health industry. To force these industries to be honest, fair, and responsible members of society would be the same as limiting the number of regular beatings they could give us, their customers. This would spoil all the fun the CEOs and fellow henchmen can have with the unfair wages/benefits they are paid.

If the credit industry and others want higher profits, then replace the executives with $200K employees and then allow stockholders and the consumer opportunity to fairly profit from corporate income.

It is obvious that regulation is desperately needed. An immediate freeze on all credit card interest rates imposing regulations and granting the power of regulators to actually follow through on punishment for violations would be the best thing any President of any nation could leave as a legacy. The same scenario would work for other industries also. Talk about boosting the economy short and long term, what Congressmen/Congresswomen will step forward and actually help the people of this nation? No brass? No guts, no glory.


Most credit card issuers tell customers that they disclose terms and conditions on their loans. However, users typically receive disclosures of changing of terms on current sums owed through inserts lost in billing envelopes stuffed thick with extraneous advertising material. The disclosures are typically lengthy 8- to 32-page flyers printed in hard to read fonts in colors and backgrounds that are difficult to see. They are also densely worded in legal language with the "disclosure" hidden in a sentence somewhere in the middle of the material, which is especially difficult to detect and if it is, to understand since they use arcane terminology and even double negatives. Legal professors experienced in banking law admit that they cannot even interpret this material. This is not disclosure. This is fraud. Fraud needs severe punishment beginning with cancellation of the debt and then a bout with the criminal justice system.

bitter card holder

I caught a C-Span hearing with a couple of the card companies, and one of the Senators asked at what point did they figure people would just give up. I see no difference between homeowners struggling with an ARM and cardholders struggling with increased payments, because I am right there with others that may never have been late or overrun a limit, but received notice after notice of changes and increased payments. If you think of the auto workers and others that lost jobs and without warning started getting bills that increased every single month, pushing them further into debt with no way out, you have to wonder who Congress was working for. I think card companies have begun a downward spiral that will eventually put them out of business, because there is no profit for them with folks that pay off debt each month, and so many former card users stung by their current practices will discontinue use or not even qualify for cards in the future.


The same banks that are offering free checking are the same banks charging exhorbitant fees on their credit cards. They used to charge low rates on their cards and lots of fees to their depositors. Then they lost their depositors. They're about to lose their credit customers, too. I'm borrowing against my 401K to pay off the legal loansharks. With 30% interest rates, I'll never be able to save enough to retire, anyway.


Forget arbitration. Write to the company CEO and also file a complaint with the Office of the Comptroller of the Currency if you have a legitimate complaint.

MBNA persistently alleged they had no record of "payment received." After the second payment from my bill-pay service failed to solve the issue, I personally sent a third check by certified mail. Upon receipt, magically all three payments showed up along with late fees and trumped up interest rates even though my account was overpaid by over $6,000.

I stopped payment on one of the checks (for which I was penalized). MBNA ignored my numerous correspondences during this entire travesty. I finally wrote a letter to Ken Lewis, CEO of Bank of America and received a call from his secretary a week later followed by a refund of the unjustified charges. I also filed a complaint with the Office of the Comptroller of the Currency but have not received a follow up, eight months later.


When the IRS decided I could not deduct credit card interest, I decided never to carry a balance. That was 20 years ago. Had a store card that went from 13% to 26.99% overnight. Called them and cancelled the card after much argument that I should not. Would not do business with BoA if my life depended on it. They hike their rates because the illegal aliens they are screwing have no option--that's the only place they can get a credit card or loan.

Call your credit card company and ask for a lower rate. Mine dropped instantly to 11.99%, and they lowered it without asking to 9.24%. Told MBNA I would cancel the card when the charged me $39 for late payment that they had and did not record. Told me that was my option, so I cancelled the card. By the way, credit card companies hold posting payments to charge late fees. Verify with your bank the actual date they take your payment and make them remove the fees and adjust your rate if they change it "because you are late." Schedule your payment with your bank, and all you have to do is deal with keeping your balance for the payment up to date.

Call the credit card company and ask for a better rate. Look at home equity lines of credit. They are way down below 5%. Use it to pay the credit card, and think before you say charge it.

Grumpy old man

Okay, Enough already. Credit Card companies are out of control and have been for many years. We've all said that.

The concept of usury was incorporated in law until the 1970s, when Citibank led a consortium of other banks to revise interest rate caps because of the inflation that was prevalent then. What's happened since is in large measure due to regulation: The banks claim their immunity to state laws on interest rates (if any still exist) because they're engaged in "interstate commerce" and thus regulated by the feds.

So, why not regulate the industry in the following way:

- Cap interest rates by tying them to the prime rate plus a fixed number of percentage points. Restrict changes in interest rates to a specific calendar--say, quarterly.

- Separate fees and surcharges from the total balance on which interest is charged. You are supposed to be charged interest only on the amount you borrow according to contract, not on fees charged.

- Require one method of calculating interest due on purchases and cash advances, eliminating double interest calculation periods.

- Require a standard "pay off without interest" period.

- Permit opting out of arbitration clauses without termination of the credit card.

- Require copies of any reports sent to the credit bureaus as a result of actions against the consumer to be sent to the consumer, along with a procedure to respond to that report to the credit bureau.

I'm sure you can add to the list.

I believe that none of these items will send the industry into turmoil, cost extravagant amounts of money, or create immense ripples through the economy. We're starting to see some action from the regulators that goes in this direction--Dr. Ben Bernanke sent some of this message in testimony in Congress earlier this spring. We just have to have either regulators or a Congress with enough intestinal fortitude to follow through.

LS, National Consumer Law Center

Angry about credit card practices? You have until August 4 to tell your story to the Fed so it will adopt strong rules to ban unfair and deceptive credit card practices! Submit comments online at E-mail your story to, mail them to Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, NW., Washington, DC 20551, or fax them to (202) 452-3819 or (202) 452-3102. Mention docket OTS-2008-0004 in your e-mail "re" line and in your letter.

Billy Bob

Currently the regulations are ripping off even "able to pay" creditors. I have a student loan from Sallie Mae and have gotten the runaround for three years trying to pay it off. I make $200K a year working in Singapore. They made it impossible to contact the company--by e-mail, Web, snail mail, or phone. Why? Because they are getting 9% from me and borrowing at 4%--and if I default, the government pays them. Hmmm, what a good deal. I wonder how one gets such a deal? That would be through lobbying. And it turns out they have been charging me late fees for six years, even though I am on automatic bank withdrawal. Turns out they changed their system some six years ago, and it withdrew a payment but then credited it back. So they considered that a missed payment and have charged me a late fee every month for six years. Never informing me, of course. America is so full of legalized white collar crime it should change its name to United Mafia Alliance.

PayPal Ebay Rape

If you think credit card lenders are bad, look at the thousands of people who are literally extortion victims of the PayPal/eBay axis of evil. They pretend to have credit-card-like protections while hiding behind a 30-page term-of-use document. Buried in that agreement are terms that allow PayPal (eBay) to do whatever they wish with no practical recourse for the consumer. To add insult to injury, only PayPal makes the decision about what is fair.


I am what credit card issuers call a deadbeat. I use a rewards card as a checking account buffer and always pay off the balance. Everything I buy goes through the card if it is possible to do so. I collect a nice cash reward. Meanwhile, the card company keeps lowering the interest rate and increasing the limit to encourage me to carry a balance. They also tried to trick me into a different agreement by sending a "trash" letter, which said, hidden in the fine print, they would issue a new card with more benefits (hah) unless I called to decline the offer. Always read the trash letters they send.


If you have to take credit on credit markets, it means you are living beyond your means. Buy only if you can pay by check or cash.


It's simple--don't use them and regulation won't be necessary. Screw credit cards.


Although I agree with much of pro, fundamentally, I have to go with con. Also, I haven't sufficient understanding of the H.R.5244, but government involvement tends to make me nervous. I think there shouldn't be sudden rate increases, but also, rates shouldn't be capped or regulated. Con is right in that credit card holders must be responsible. Buy what you can afford, use credit wisely, and try to stay debt-free. However, if BofA or Citi is losing profits elsewhere, they shouldn't just double a debt's APY either. It does come down to caveat emptor on the consumer side and ethics on the issuers' side.


The most important part of any contract is to make sure that each party can't change the terms without adequate notice and in an equal manner.

Credit card companies screw people by changing the interest rates on the balances already accrued. They also change interest rates that are advertised as "forever" or "permanent," even if the credit-worthiness of the client didn't change. These practices must be outlawed as must the arbitration clauses, which are a license for the credit card companies to steal.

Arguing that people are stupid, emotional, etc., and don't know how to stop charging is stupid in itself. Stop making excuses for people. Let them suffer for their own mishaps. I have no idea what my interest rates are, and I don't care as I don't keep a balance on my card. If kept a balance, that would change how I use my cards. I read the disclosures on all my cards and had little trouble understanding them--except double-billing. That is a crock.

Last Iconoclast

The answer is not more laws but a more heavy-handed approach by bank regulators to crack down on loose credit standards.

Just as the subprime mess was created in part by banks lending to those who did not qualify, the same problem has caused consumers to rack up ridiculous amounts of card debt, when they should not have been given so much credit in the first place.

Like an alcoholic or an addict, the American consumer was made delirious with ready availability of credit, which has now suddenly dried up. Time to sober up, America.


The answer is scary, but personal responsibility is a good way not to have these problems. One way is to stop using revolving credit. Asking taxpayers to continuously bail out (which they do when debts are not repaid) people who do not manage their money has been a mistake. I would suggest watching a personal financial program (in which almost all promote very prudent use of credit cards) vs. what CSPAN covers. No one should ever use, buy, engage, etc. with anything they do not understand. Sorry, but using your personal 401K is much better than asking others to pay your debts. Very basic common sense is to buy only what one can afford. There is also the phrase "rainy day fund," which is another very good personal practice. Government is not free, and more regulation costs more. Whether it's business or government, the costs will transfer to the people. It gets really bad when both government and business combined pass the costs to us. This is the case with revolving credit. Many laws were written to protect both the lender and borrower. Hence, lots of hidden costs and rules. After many years of our government trying to protect people who repeatedly make the same mistake has failed.


I have one credit card. I use it more or less like a check. I pay it off completely and never carry a balance. People who think they can have something for nothing are almost always wrong, much in the same way that people think passing bonds will get something done at the expense of someone else. Live within your means, and save for the bad times that always occur at some point down the road. It works most of the time.


Bank of America has been terrible about this. As well as HSBC and Wachovia. I saw one of my cards go from 13.49% to 25.99% while there was no change in my credit score. Nothing new--they just decided that they can take a larger profit. Card closed. They refused to lower the rate.


Auk, Auk!

A bird you say, once was. The same can be said about the innovator in this country. My consulting job was to commercialize an innovative new technology that substantially reduces the energy required to operate a commercial over-the-road transport truck.

Seems like a good idea. This company and technology had it right and moved a Kenworth from 3 miles per gallon to 15 miles per gallon with an 80,000-pound load. I was running a truck with a driver and assistant around the nation doing demonstrations and briefings. This was a very small company, and soon they informed me that they were facing liquidity problems but were about to secure new financing based on the success of the truck and briefings. So they asked me to pay for the truck, hotels, meals, etc., to keep it on the road. I agreed for two months. My credit cards used more than $25,000 in expenses. The company did not succeed in financing. I was dropped. And the company failed.

Now the credit cards are paid down to a bit more than $12,000, but the interest rates are now 32% and each month $39 is accessed for late payments and another $39 is accessed for over credit limit, plus 32%. The IRS does not see this as a business loss, as I was not a principal in the company. So not only will I eventually have to pay in the range of $75,000 to pay off the company, but also I have talked to Visnu and Katar in Mumbai on several occasions, and they inform me that "your interest is set at 32+%, and how else may we help you?"

The IRS insists that I must get a judgment against the company that is out of business to claim the consulting fees that I also did not collect. But the expenses on the credit card are mine. The costs paid for fuel, hotels, meals, tires, and more than 22,000 miles on the road, working and driving more than 12 hours per day. They indicate that the interest is not deductible, as I obviously was having a wonderful time on the 2 1/2 month vacation. When interest is no longer deductible for business startups, the innovation in the U.S. will die just like the long extinct. Auk.

Suzanne Swan

I agree with Wet Cranky Monkey: Carry cash, pay in cash, and let the credit card companies stew in the mess they created. They earn their profits from us but bite the hand that feeds. Visa got my birth date wrong, but guess whose fault it was? Mine, even though I am a graying customer of 40 years.


I received an offer of a GM MasterCard from HSBC with a balance transfer option of 4.99% fixed for term of advance balance. I am trying to find out the minimum monthly payment as a percentage of the balance. Both the toll-free number and customer service can't give me the info.

I was planning on having an automatic deduction made to pay on the card each month so I'd never have a late payment and get the default interest rate.

Payday Loan Advocate

When you build a course of action on a deceived foundation, you can certainly create a rocky aftermath. Some politicians are looking to wipe out the payday loan industry and sadly, some have succeeded in many areas. This action reflects the groundless idea or assumption that payday lenders fall under the same category as illegal loan sharks. This ongoing challenge to pass this legislature attempts to restrict or take away your ability to get a payday loan for unforeseen emergency cash needs. Please do not be misinformed, and educate yourself, friends, and family on the right of financial independence.
--Personal Money Store (Professional Blogging Team)

Payday Loan Advocate

The short term financial assistance that payday lenders offer often is one of the fastest and safest ways out of a sticky financial situation if used responsibly. Unfortunately, people of some political importance don’t see it this way, probably because they have never been in a situation that would require a little help from the payday loan industry. These bipartisan efforts to outlaw the entire industry just go to show how detached they are from real Americans. Get educated on the facts today.
--Personal Money Store
Professional Blogging Team


HSBC GM Card did the exact thing to me as they to BJ. I have had their card for a few years. I, too, paid my payments via their Web site. They also posted my payment one day late, and they increased my interest to 30.99%. I suffered and paid their extortion for several months so as not to damage my credit. I was told so idiotically that they were sorry that there was not a better rate available for me. What a bunch of bull.

It was easy to adjust it up, but I had to wait nine months to get it back to 14.9%. During that time of theft by HSBC, it became impossible to pay my other bills. I have fallen behind with other bills and have called those card companies and they are willing to help and drop their interest. Long story short, today I found out HSBC raised my interest back to 30.99%. No notice from them. I have not ever been late with a payment. I have been late with some of my others and am working on those--those companies haven't raised my rates, but HSBC did. I called and cancelled my card with them. I told them I would not pay them a dime in extortion interest. I am contacting an attorney Monday. I will default or at best use a debt reduction service to get past this. I told them I will never do business with any HSBC affiliate or GM ever again. I traded my Avalanche off for an awesome Daytona Charger, so they can all kiss my ass. GM card and HSBC are no better than financial terrorists. I hope they go belly up and there will be no government bailout for the dirty SOB's. I told their customer service in Timbuktu to look for another job because HSBC is going fail just like all the others that are getting mostly what they deserve for ripping off the consumer. What are they trying to do is punish us and extort us because they can't pay their bills. Wish the government would bail me out. It wouldn't cost $700 billion. I'm going to laugh my ass off when I see HSBC go down the tubes in financial ruins. They deserve it.

LIsa P

That there are times that through the changes in our economic life, we learn the things that we should not only found in the books as well as in our daily experiences.

For those among you who thought that U.S. Secretary Henry Paulson planned to use the second half of the recent $700 billion financial rescue program to buy up all of those devalued mortgages that flutter in the wind like so much confetti, think again. Instead, that mortgage juice is going to be spent on consumer credit. Since a payday cash loan is a form of consumer credit, particularly for those without a credit score or who have credit difficulties, that industry should receive aid as well. Paulson says that he wants Americans to have easier access to such traditional forms of consumer credit as car loans, student loans, and credit cards, and that these forms of consumer credit have become more costly because of "illiquidity" in the consumer credit sector. "This is creating a heavy burden on the American people and reducing the number of jobs in our economy," he says. Indeed it is, but do you see what Paulson is doing here? He's admitting that he made a mistake with his previous version of the rescue plan. Imagine if America had had a President who was willing to do the same. Perhaps America could pick up the pieces and move forward--or maybe certain problems could have been avoided. Government officials may just have the right idea: They're planning to use some of the bailout money to encourage private investors to come back to the market. With a strengthened economy backed by investors in the world market, a more stable job market will result, and with a more stable job market, fewer people will have to depend upon payday cash when the chips are down. Sure, the industry will be there when folks need help, but the product is not designed for long-term financial dependency.


I recently experienced a credit card increase with HSBC and Capital One both. Capital One changed my rate and refused to work with me because they said I had too much outstanding credit. It wasn't for late payments but outstanding credit. HSBC sent me to a Middle Eastern call center and all they knew how to say was we are not going to help you and that was in your original agreement after raising my rate from 10.9 to 30.9. I have been able to pay everything for now on time with the exception of a few because I was one of the layoff victims from last year. I was only a few days late and it didn't matter to them. I think the credit card regulation should not have been announced or should have gone into effect immediately. The government just gave them time to screw every person they could. It is doing more to hurt the consumer than help. This is prime example. In the past, if I made a late payment and called in, they would adjust it and work with me because I had such a good credit score. Now what? Do you file bankruptcy and hurt your credit after years and years of building it up? I lost everything including my 401K after my layoff and at my age this is not a good thing. I am going to debt reduction or one of the consumer counseling consolidations. This is ridiculous. If I had the money, I would get an attorney and go after HSBC.

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