Justice at last for credit card borrowers
Scores of nasty credit card tricks could soon be banned in the USA. But is the UK going to follow suit?
The US's Federal Reserve is a central bank, like our Bank of England, but also with a few powers and responsibilities similar to our banking regulator, the Financial Services Authority. With its regulatory hat on, it's been fighting with credit card companies over their dreadful small print.
More recently, it's been joined by the US Congress (which is, loosely, like our Houses of Parliament). Even Barak Obama has been doing his bit by talking tough to the card-companies' executives (at least in front of the press).
Tricks US cardholders must deal with
Here are just some of the tricks that debt-laden Americans have to cope with:
- Arbitrary hikes in interest rates on existing card debt. (We have this one here.)
- Customers charged for paying their bills through the Internet or by phone.
- A complicated trick that sometimes results in Americans paying interest on debt they've already repaid.
- The interest rates on all your cards are raised if you miss a payment on just one of them.
- You are charged different interest rates on different types of debt, and forced to pay off your cheapest debts first, leaving the most expensive debt accruing interest till last. (We have this one, too.)
- Due dates are moved around, making it harder to keep track of when a payment is due. (Non-payment results in a late-payment penalty, just like here.)
- Or the bill is due in the morning instead of the evening. (That's happened here as well.)
Tricks UK cardholders must deal with
We don't have the full set of US card tricks, maybe just half, but we sure have our own on top! Here are just some of the problems that we suffer from:
- Low minimum repayments, encouraging us to take decades to clear the debt.
- Lured in by low 'typical' interest rates but then being offered higher rate.
- Increasing your credit limit without asking, knowing full well many people see it as a target, not a limit.
- Vastly over-priced payment protection insurance.
- Miss one payment and you get not just a £12 penalty but all your promotional offers are closed and you have to pay higher rates.
- Massive charges and interest on both cash withdrawals and credit-card cheques, with interest charged instantly, not 45 days later.
The US is taking on the card providers
The US is attempting to do this:
- Ban the first three tricks that are on the US list at the top of my article.
- Restrict marketing of cards to students under 21.
What are we doing to take on the card providers?
Compared to the US, we're doing nothing at all. We had some interesting new consumer protection rules last year (read 31 types of scam to end next month!) that I think are going to slowly make an impact as businesses realise they have to stop a load of dirty tricks. However, there's been nothing like this US drive to explicitly eliminate credit-card tricks.
We could easily have a wishlist of a dozen tricks that could be banned. Of course, we'd have to ban all the US ones too, as they'd probably be brought over here to replace the existing ones!
How hard is it to take on the card companies?
Personally, I'm not convinced that these measures will put US credit card companies in their place and that all these changes will limit their dodgy practices. As we know from our long penalty charges saga*, it'll take a lot of work to stop such mighty companies, what with their political contacts, money, and legal teams.
Already as a result of the US legislation, some American newspapers are reporting that interest rates for some customers have doubled or tripled in advance of the changes. Those companies will do everything they can to protect their profits.
The new legislation that Congress is looking at would also explicitly ban penalty charges for late payments. Now, I reckon we'd all be in favour of that over here!
*Read the latest in Bank charges victory still years away.
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