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Stricter credit card underwriting standards might be good for consumers in the long run - The Credit Card Act of 2009

Stricter Credit Card underwriting standards might be good for consumers in the long run - The Credit Card Act of 2009

For years credit card companies have been soliciting new clients by mailing out attractive credit card offers with teaser rates and deceptively complicated terms and conditions.

On May 22, 2009 President Obama signed The Credit Card Accountability, Responsibility, and Disclosure (Card) Act of 2009.

The Credit Card Act of 2009 signifies a major turning point for American consumers. The Act, which is effective from February 2010 will end the days of unfair interest rate hikes and hidden fees that consumers have been subject to by the major credit card companies.

Most credit card companies are taking advantage of the "window" between now and February 2010 and are quickly adjusting the terms and conditions of the cards they've issued. This isn't fair to their customers, but since when have these companies given a damn about their customers?

With that said, new cards are only being issued after the prospective client meets much stricter underwriting criteria. This will be good for consumers in the long run as they won't be permitted to borrow more than they can realistically afford to repay.

It's time that consumers realized that credit cards are a necessary evil .... and that we should treat them with caution.

Posted by Stewart Penn - Los Angeles Condo Specialist on 08/08/2009 01:20 PM

Comments (10)

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Originally posted at: LA Connection Property Blog: Stricter credit card underwriting standards might be good for consumers in the long run - The Credit Card Act of 2009

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10 Comments on Stricter credit card underwriting standards might be good for consumers in the long run - The Credit Card Act of 2009

AUG

Stewart: Credit cards, like most things, have good sides and bad sides. Obviously, it is never good to "abuse" one's credit cards. But... what do you do... when the rent or the house payment, or the car payment is due, and you do NOT have the money... and there is no other place to get it from ? None... nada. Sometimes doing something that is "bad" for you is better than doing something that is "worse" for you. For many... it is a really tough, really nasty life out there.

Credit card companies will find another way to make funds like offering home equity loans and the cash advance or pay off your balance schemes. It's like the WC Fields shell game, they just keep moving the shells around.

Stricter underwriting is long over due. While I empathise with Karen above, The huge majority do not save their cards for emergencies. They use them to get what they want now instead of waiting until they can afford it.

Karen - I agree that many people turn to their credit cards as a "loan of last resort".

The problem is there's never a real plan to pay the balance down to zero.

Ron - It's all about "Instant Gratification". Unfortunately that's become the norm instead of the exception.

Stewart: Oh, I totally understand that there may not be a plan to pay the balance down to zero. Sometimes... when your back is up against the wall... you do what you need to... to survive and keep a roof over you and your family. Not that it's right, but what to do if it is the only choice... other than living under a bridge ?

Karen Anne - I certainly empathize with the situation you describe.

What is so awful is how the credit card companies realize this and exacerbate the problem by increasing interest rates & reducing card limits at the very worst time for the customer.

I certainly see this as being a step in the right direction. However, this will negatively impact consumer demand moving forward. We are not going back to the economy we had over the past decade.

Hi Stewart ~ I'm psyched that something is finally being done to rein in credit industry abuses. I only wish the law had taken effect immediately and I really wish that rates had been capped at some reasonable level. It has been a long, nasty ride since the banks were allowed to charge sky high rates.

Liz

AUG

"For years credit card companies have been soliciting new clients by mailing out attractive credit card offers with teaser rates and deceptively complicated terms and conditions."

That's got to be one of the great understatements of the century -- LOL.

Many years ago when there were many banks, I had a credit card from each bank. Over the years, banks bought out banks and I ultimately wound up with seven credit cards from Chase. They just raised the rate on four of the cards because they had no balance on them. I now have four fewer credit cards -- LOL. That should teach them.

AUG

8/17/09 - CNNMoney.com: Rising credit card minimums: Fair or foul?

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