The Credit Card Industry Is Facing New Regulations

The word from the Washington Post is that The Federal Reserve, the Office of Thrift Supervision, and the National Credit Union Administration, have joined forces and would unveil today one of the most aggressive efforts in decades to crack down on the credit card industry.

The proposed regulations, which could be finalized by the end of the year, would slap the label of “unfair or deceptive” on certain practices, such as increasing interest rates for seemingly no reason, charging interest on debt that has been repaid and assessing late fees when consumers are not given a reasonable amount of time to make a payment.

The new regulations would be a marked change from the past since federal agencies have usually limited themselves to requiring the industry to do a better job at disclosing the fine print.

Several members of Congress have blasted the Fed for not effectively using its power to regulate card issuers. A number of influential leaders, including Sen. Christopher J. Dodd (D-Conn.), chairman of the Committee on Banking, Housing and Urban Affairs, have proposed their own bills to ban unfair practices.

The proposal also seeks to regulate overdraft protection, banning companies from assessing a fee unless the customer chooses not to opt out of that service.

Not surprisingly, the banking industry is not happy about the new regulations and insists it would make credit more scarce. They were quick to denounce the rules and vowed to fight them. But other consumer advocates and lawmakers said the proposals don’t go far enough and want lawmakers themselves to take action. However, the fact remains - this new proposal, would ‘finally’ send a clearer pro-consumer message.

Comments

[User 187603:]

Ahoy, this won't stop Visa from taking over the world, watch out mastercard. Everybody loves the V, get on board while you can or watch us all buy new yatchs, muahhah

2008 May 02 07:49 PM

[bullbaker:]

I don't think this bad news for Visa & Mastercard, they will process more transactions. It's bad news for the banks holding the loans with their interest rates and fees. I believe this will open the door for folks to keep charging on the credit cards and have bigger debt on their balance without worry about interest rate charges and fees.

2008 May 03 09:41 AM

[david roper:]

I agree with Bullbaker. This is allow MORE people to use Visa freely and often, not less.

2008 May 03 09:48 AM

[User 172125:]

Just remember, these regs don't effect V- as V doesn't carry credit balances....

2008 May 03 11:58 AM

[ussmls7:]

What gets me is how just one of my credit cards rates, jumps up for no reason!This is how they gouge there best customers? , but you see, they have to recoup all the losses incured, from bad Banking desions! The Large Investment Bank, who's name is on it will lose my biz, my other cards have remained at there same low rate.
There where Biz news outlets complaining of this in Jan. I knew the Gov would step in, there is so much more to hit the fan, All the Politics will step up to get air time, it's election time. The more they touch, the tax payers lose! Next the Fed can buy me a huge Gas drinking SUV, along with student loans, CDO's or a Bank or two.

2008 May 03 12:32 PM

[meow:]

bullbaker, very cool logic! i have to agree with you. this new law will actually instill a new level of trust and comfort in people, by knowing that they may use their cards more often, with the knowledge of knowing that they can't be squeezed so easily anymore by the banks.

2008 May 03 11:34 PM

[chemist:]

This is what it is about. I just rec'd this week an announcement from C___ (4 letters) that my interest rate was going to zoom from 8.2% to 13.99% post dated to Feb 1. I am carring 2K debt on it and paying it down at 10%/mo. No reason for the interest increase. The card is going in my desk drawer. Once the debt is gone, I will never use it again. But let them continue to send me 14 offers a month. Hahaha!

2008 May 04 12:50 AM

[chemist:]

One more comment, a pet peeve about every card I have. They offer you a deal, a transfer, a loan, all with no interest for many months. Except, you have to look hard (sometimes referred to card agreement, if it can be found) to see there is a "transaction" charge of 3%. Well, if it was to be paid off in 1 mo, that is 36% interest. Most people won't pay it off that quickly - the example above is an extreme.

The other point, again well hidden, payments you make on your card will be applied to the lowest interest balance - the special 0% interest balance, while any balance you had previously will sit and collect interest until the 0% balance is paid off. Then, when you realize the scam that was just pulled on you, and you quickly pay off that 0% loan, you have already paid a very steep interest on it through that transaction fee.

2008 May 04 01:02 AM

[User 172125:]

Chemist- your best revenge is making money by buying V- I have made more money on that stock than I have or will pay in Credit cards (balance and interest!) for the rest of my life............

2008 May 04 03:08 PM

[V Winners c...:]

I fib a little sometimes. Please forgive me. At any rate, the whole point is credit card banks have been ripping people off and now it's time to stop. End of story. V winner is so confident in his stock, he has to hype it on message baords. What does that tell you? hehehehe

2008 May 04 06:16 PM

[bullbaker:]

The rebates are in the mail!!! Would that be Debit or Credit??? ;^)

2008 May 05 05:24 AM

[Indoinvest:]

Lower interest lead much more spending by the card. Nothing to stop V go up and fly...

2008 May 05 06:55 AM

[stacked up:]

We hate: credit card companies
insurance companies
banks
medical insurance carriers
auto insurance companies
homeowners insurance companies
pharmaceutical companies
politicians

But, we LOVE our "V" ...Keep proving the dumb analysts wrong..
V Rules !!! Keep on keeping on Big V .....!

2008 May 05 01:44 PM

[King Solomon:]

Enter your comment hereYou know it takes several million years for a piece of coal to turn into a diamond. Looking at it everyday won't make the process faster.

2008 May 05 02:39 PM

[User 172125:]

I'm buying V until the PE hits 1000 to 1- that will be when I feel it is overvalued.

2008 May 07 01:53 AM

[gracec:]

Here's a question, eventually the IPO shares that the banks are holding they'll sell it right? won't they flood the market with more V shares? How long are they locked up before everyone starts selling? Wont' that put downward pressure? Why is it trading at 210 times PE? Just at these levels I'd wait for a pull back before I buy.

2008 May 09 01:58 PM

[User 172125:]

Grace- I recognize you as the author of the article-

banks have a 3 year restriction period (unlike the standard 6 month lockup)

No- they won't 'flood' the market. These are not some guys out of a boiler room looking to dump the stock. IF they sell- it will be in pre-arranged blocks and in increments and we have 3 years to worry about that :)

Next- Its trading above 200 to 1 due to the fact that there were many ONE TIME charges last year due to the corporate restructure, litigation reserve costs- and other non-rec charges (see the prospectus)- They came into q 1 as a new public co with a loss- q2 was their first reporting unit and was at a profit (above analyst expectation)- bottom line- look for the pe to come down substantially.

ALso- C class euro shares are being bought back this year- (the euro shares) which will furthuer UN-dilute the outstanding. B class shares convert at .79 to 1- FURTHER reducing outstanding.

Sadly- most people haven't read the prospectus- but astute investors have, which is why you have seen the share price almost double from its ipo price.

Last- today and yesterday WERE the pullback- now is a great entry point- and we will see a big run pretty much straight to 100 -------

2008 May 09 08:48 PM