The final provisions of new credit card legislation aimed at protecting consumers won’t go into effect until February. What this means is that right now, while consumers are relatively unprotected, credit card companies are raising rates and adding fees to reap in as much profit as possible from their customers before such strategies are outlawed. The situation is not unlike an overweight individual bingeing on pizza and fast food before being sent off permanently to a weight-loss camp.
This is hardly a news flash, but credit card companies do some pretty evil things. CNN names 5 of them, including the most obvious ways that they siphon customer’s money: jacking up rates and adding fees.
Some of this evil business will go away come February. But is that too late? Certain members of the Senate, including Christopher Dodd, think so. As reported in the NY Times and the WSJ, they’re proposing that rates and fees be frozen.
From the Times:
“At a time when families are struggling to make ends meet, jacked-up rates can quickly create crushing debt,” Mr. Dodd said in a statement. “People need to be responsible with their money, but they shouldn’t be taken to the cleaners by outrageous fees.”
Before crowning Dodd a hero of consumers everywhere, here’s a more cynical take on the issue from the WSJ:
The measure is part of a populist push by Mr. Dodd, a fifth-term senator facing a tough re-election battle against former Republican U.S. Rep. Rob Simmons next year. Mr. Dodd’s ties to the financial-services industry and his receipt of a home loan from former Countrywide Financial Corp. have hurt his standing with voters. He was cleared of violating Senate ethics rules in the mortgage issue.
Mr. Dodd has responded by embracing consumer issues for which he has advocated in the past. He joined with four other Senate Democrats last week to introduce a bill cracking down on checking-account overdraft fees, and has said a new consumer financial protection agency will be a centerpiece of his committee’s efforts to overhaul regulation of the financial-services industry.