Credit Card Federal Regulations Resolve Issues

Pro-consumers are hoping for the best and financial institutions are ready to support their stand. The House Services Committee resolved the first issue in the establishment of a federal agency for financial services regulation.

However, banks and credit card companies will strike while they can. Consumers report several rate increases at present, as consumers wait for the new Credit Card Act to take effect next year.

The Senate Financial Services Committee now pushes forward its plans to establish a Consumer Financial Protection Agency. The committee will try to move up the effective date of the said Act to December 1 instead of February 2010.

As observed, card providers are taking advantage of this grace period to be able to fill revenue gaps rooted from delinquencies and record defaults.

LowCards.com CEO, Bill Hardekopf, said that the number of accounts overdue by at least one month has increased from five out of six top credit card companies from August to September. Other card providers revealed that their default rates reached 14.25 percent.

Some industry watchers reveal that even with stable interest charges in the market, high unemployment rates at present indicate possible financial industry losses.

According to Greg McBride, a senior analyst at Bankrate.com, these losses force banks and credit companies to aggressively cut credit limits and close consumer accounts.

The holiday season is fast approaching and consumers are told to watch out for banks' tactics and avoid ruining finances. In purchasing items, consumers should avoid card companies who lower credit limits with little or no warning. Companies who suddenly charge higher rates even if paid on time and those who impose new annual fees as high as $99 a year should also be avoided. Some financial institutions that charge higher cash advance and balance transfer fees are not ideal for consumers who want to save. Most of all, card holders should avoid card providers who cancel credit cards and reward programs.

Customers with excellent credit can look for a better deal and pay off balances as quickly as they can.

However, McBride said the only problem these customers have is that they would not have been negotiating power over their current credit card issue if they carry a very large balance.

The proposal to expedite the start of the credit card law will not apply to banks and credit card companies with less than two million cards. There is no update on when that proposal will be considered by Congress.

The bill for financial regulation will move to the full House in the next couple of weeks, and face deliberation in the US Senate in 2010.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.