Editorial: Credit relief in the cards

Published 12:00 am Thursday, December 18, 2008

Credit-card holders who’ve stewed over hair-trigger late fees and explosive interest-rate hikes got some welcome news Thursday when federal regulators adopted new rules designed to shield consumers from unfair credit practices.
Unfortunately, the changes won’t take effect for about 18 months. Given how many people are already deep into the swampland of mounting credit-card debt, the reforms will come too late to save some from sinking into bankruptcy. But once implemented, the changes will help reduce customers’ vulnerability to some of the industry’s more onerous excesses.
Specifically, the changes approved Thursday by the Federal Reserve, the National Credit Union Administration and other agencies are designed to prevent lenders from making arbitrary hikes in interest rates or imposing unreasonably restrictive time limits for the payment of bills before late charges apply. Both changes should bring cheers from anyone who has ever been caught unawares by hefty late fees or has struggled to comprehend exactly how interest rates are calculated, and how they are applied to pre-existing balances. In addition to administering some much-needed restraints in those areas, the regulations also will crack down on other consumer-hostile practices, such as penalizing card holders for exceeding the credit limit because of a hold placed on the account or using a computing strategy known as double-cycle billing to further inflate interest fees.
To no one’s surprise, some credit-card issuers and banking groups have been less than enthusiastic about the new regulations. They’ve warned that the new rules could restrict the availability of credit, result in lower borrowing limits and raise user costs overall.
To which many card holders will probably say: Fine. We can live with that. Just smooth the playing field so that the game doesn’t seem fully loaded in the lender’s favor.
That fact that 65,000 people filed public comments on these changes when they were first proposed is one gauge of how irked many consumers are by credit-card shenanigans that can range from merely obnoxious to downright deceptive. It’s about time regulators responded to their complaints.
As card-holders wait for these rule changes to take effect, they should take a candid look at their own spending and borrowing decisions, and how those play into their credit problems. Americans collectively carry 1.4 billion credit cards, according to the U.S. Census bureau, and the average household has nearly $8,700 in credit card debt. In far too many cases, people hold multiple cards so that they can rotate charges among them while wracking up ever higher balances, an almost certain road to bankruptcy court and financial ruin. New rules can offer some protection against unfair credit practices, but they can’t protect consumers from their own bad habits.