US House Speeds Up
Credit Card Rules
November 5, 2009
Source:
http://www.channelnewsasia.com/stories/af
p_world_business/view/1016089/1/.html
Summary:
India’s The credit card is a thing that people cannot live without
these days. In fact, people use credit cards every day when
buying necessities, or even the things that they do not need or
worse, cannot even afford. This manner of spending has not
bothered me before, until I watched this short film about the
secret history of credit cards. For the first time, I actually
realized how deceptive this industry is and how it will pull the
whole of America down through enormous debt and bad credit
score. Though credit card company business are booming
because of the increasing reliance of people to this mode of
payment each day., there are complaints that the credit card
companies are actually abusive in their charges to their users.
There are not only interest fees but other fees that are being
charged to credit card users, and without a strong law to
control it, it has become a pain for many consumers. The US
Congress is now speeding up the process of making laws
against these abusive practices. A 331 to 92 vote in Congress
decided that it should really be sped up to prevent credit card
companies in continuously increasing their charges.
What I learned:
• Democratic Representative Carolyn Maloney
was the lead author of the bill of original
reforms for credit card laws last spring.
• Because the credit card companies knew that
an upcoming bill was about to be signed,
they reluctantly increased their charges and
created new charges so that these may not
be covered by the bill, or if it does, then at
least they can ear money while the bill is not
yet signed.
• The bill will forbid increasing the rates on
existing balances unless the cardholder is
late in his payment for 60 days or a
promotional rate has expired, and will
require credit card companies to give a 45
day notice before any rate increase.
• It will also ban rates and fees for bills
payments and will prohibit people under 21
to get a credit card.
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 What else I learned through further research:

• Another major Supreme Court ruling was in 1996: Smiley versus Citibank. This ruling lifted state restrictions on
the fees that credit card companies could charge. This was originally passed for the good cause of free market
pricing. What they were not aware of at that time was that it will give credit card companies enormous power
and profit in charging fees. From the common 5 to 10 dollar rate fees, it has constantly risen annually. The
initial goal to create a competitive market made way for credit card companies to double the amount that they
earn from charging fees to their customers.

• I have also learned that there are two kinds of people who use credit cards. First are the deadbeats which are
the kind of people that credit card companies hate: the people who pay off their bills on time every month.
The other kind is where they gain more profit: the revolver who constitutes around 90% of Americans who
don’t pay off their credit cards monthly, they just pay the minimum or don’t pay at all. These gain profit for the
credit card companies because it generates the sweet spot or the opportunity to charge higher rates to
difficult customers such as penalty interest rates and late fees. The revolvers are the people who carry debt.

• A big problem of the revolvers is the universal default or the fact that even if you are offered zero interest
rate, if you miss a payment to one or any other creditor (house, car, etc.) or your balance becomes too high, or
you credit score changes, the agreement that you originally signed becomes default and the credit card
company automatically has the right to charge you higher interest rates.

• Credit score is determined by three major companies getting information about all our spending habits:
Experian, TransUnion, and Equifax. This data is then calculated by Fair Isaac, who deploys the information to
their formula in order to generate the score of how risky a person is. The result is the FICO which is an
indication of that customer’s risk in credit payments depending of their spending and paying habits, and is the
score that credit card companies use to target revolvers.

Source: http://video.google.com/videoplay?docid=-9048007397539880204

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