New Report Suggests Changes in the Credit Card Industry

[Aug 15, 2007.]

A new study is recommending changes in the embattled credit card industry.

The report by the National Consumer Law Center is particularly critical of the industry's impact on older Americans who may be on a fixed income and therefore unable to deal with large credit card debt.

The Center reports that there are a massive number of credit cards now in circulation—more than two for each man, woman, and child in America. The debt problem, according to the Center, is exacerbated by the fact that high interest rates, late fees, and other penalties cause consumers to become mired in debt—with little hope of paying it off.

The Center recommends attacking the debt problem by forcing credit card issuers to be more up-front about credit card fees, interest rates, and the terms of the card agreements. Such agreements can be difficult, if not impossible, for the average consumer to understand since they're often written in highly technical legal language.

The Center recommends debit cards as a viable alternative to credit cards, but concedes that anti-fraud practices must be in place in order to safeguard consumer accounts.

In a proposal that could be considered particularly consumer-friendly, the Center recommends that late charges not be put into effect if the payment is postmarked on the due date. Also, the Center states that card issuers should not charge over-the-limit fees if the issuer itself allowed the cardholder to go over the posted limit.

The Center also recommends that credit card issuers be barred from increasing interest rates retroactively. Universal default policies, in which credit card companies can raise interest rates when consumers fail to pay their other bills on time, should also be banned, according to Center officials. Credit card issuers should also be barred from changing credit card terms unilaterally and without sufficient warning.

Julie Ann Amos
August 15th 2007

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