Soon to be in effect credit card reform laws designed to protect consumers and limit the ways that credit card companies can make extra profit by raising interest rates and charging late fees has raised concerns that are being addressed in Washington, DC. One proposal, introduced by Senator Bernie Sanders of Vermont, would add legislation that would place a limit of 15 percent on credit card and personal loan interest rates.
It is not known whether this legislation will become a reality. It has yet to win the support of President Obama and is not favored by representatives of some states that rely heavily on their banking industries. It is also not know what effect, if any, the passage of such legislation would have on credit card and loan accounts that have already had their interest rates raised in an effort by banks and lenders to protect their profit after the already passed credit card reform laws go into effect. The effective date has not been determined yet. The original date was set as February 2010, but talks are underway to change that to December 2009.
Creditors are required to give 45 days notice of increase in interest rates, allowing the consumer the option of accepting the increase, or allowing reasonable time to pay off credit card debt at the previous rate and canceling the account. Statistics have not yet been reported regarding the effect of the 45 day notice. It is expected that many will opt to close high interest accounts if at all possible and this could damage the credit card industry’s profits. Capping interest rates would possibly be a happy medium, allowing the careful consumer the freedom of credit without the fear of sudden interest rate increases. While limiting the creditor’s profits through high interest rates, profit would also increase due to the fact that more consumers will keep using credit cards.
