The Credit Card Act Is a Bold First Step

The Credit Card Accountability, Responsibility and Disclosure Act, which went into effect last Monday, is just the beginning of holding large corporations accountable for how they do business with the general public. The act will "finally level the playing field," according to President Obama, by forcing credit card companies to reform charges that leave customers wallowing in debt. These laws are one step leading America out of corporate control and back into our hands.

As the recession rolls onward, many credit card holders are slipping further into debt because the credit card companies have been ripping them off. When borrowers are facing difficult choices as is, why should they be burdened with unnecessary expenses? New requirements such as having to give reasonable notice before making major changes to contract terms and before applying late fees are two terms of the Credit Card Act. Some nickel-and-dime fees have been outlawed -- whether you pay your bill on the phone or receive a paper statement in the mail will no longer make a difference in how much you're charged. Also notable is that over-the-limit fees must be eliminated unless cardholders are informed of the cost in advance.

Credit card companies' attempts to collect on abusive interest rates resembles some sort of Mafioso extortion bid. Sneaky procedures such as double-cycle billing and raising interest on existing balances or new accounts will no longer be tolerated. When a payment higher than the monthly minimum balance is received, that difference must now be applied to the line of credit with the highest interest rate.

There are many ways in which dealing with your lenders won't change, such as a company's ability to close your account or lower credit limits without notice. It is also realistic to assume that they will find creative ways to avoid losing profits associated with their bad business practices by conjuring up new fees or recategorizing expenses. Although this act isn't preventing corporations from entering into unethical or abusive contracts with consumers, it does put a wrench in the gears. What is important to focus on is the fact that our government is taking the side of consumer rights -- there may not be a noticeable difference now, but given time we can look forward to some very big changes.

While none of these improvements come without strings attached, the Obama Administration has made history with the Credit Card Act. The extent of these changes, however, may not add up significantly without employing a government watchdog to ensure big business plays fair. Ask Congress to support a Consumer Financial Protection Agency.

Photo Credit: Andres Rueda