Credit Card Companies Continue to Raise Rates, Lawmakers Shocked
Oct 28th, 2009 @ 12:58 PM by Amber Nelson
So, remember that new credit card law that will go into effect next February? The law is an attempt to curb credit card issuer so-called abuses and protect consumers from steep rate hikes.
Well, not surprisingly credit card issuers are not happy about the upcoming restrictions on their business practices. But since the law, which will prohibit them from raising interest rates on anyone except those who are more than two months late on their payments, doesn’t go into effect until February 22, these companies are continuing with their same practices and raising rates even higher than they previously had on borrowers who are less than two months late. A new study from the Pew Charitable Trusts, as cited in a recent CNN article says that credit card interest rates rose by an average of 23 percent from December 2008 to July 2009. These credit card companies are probably just trying to rake in what profits remain before the restrictions kick in.
Some in Congress are really upset about this, vowing to move up the date the new changes will become effective.
“It was argued … that they [card issuers] needed more time, and we granted them more time, but it was under the understanding that abusive practices would not continue, and double and increase dramatically,” said Rep. Carolyn Maloney, D-N.Y. She and others have proposed moving up the new start date of the Credit CARD Act to December 1.
“We worked long and hard to enact the safeguards included in the Credit CARD Act,” Senator Chris Dodd, D-Conn. said. “And no sooner had it been signed into law, that credit card companies were looking for ways to get around the protections this Congress and the American people demanded.”
I just don’t understand why so many people in politics understand so little about human motivation. Humans are motivated by self-interest, on a general level. And when it comes to business, that means people want to make money, and lots of it. Credit card companies are in the business of making money, not philanthropically passing out credit for the convenience and best interest of their customers. If you take away their means of making profit they are going to change their practices to try to recover that money, or they are going to leave the business. So why are lawmakers so shocked and disgusted with credit card companies for raising rates ahead of the law?
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.