Saturday, January 30, 2010
Recent Changes in Laws Regarding Credit Cards
I am as equally perplexed as Harvard Law Professor Elizabeth Warren regarding the contracts that now exist concerning the acquisition and use of a credit card. What used to be a contract that was approximately 1 1/2 pages long are now 15 to 30 times that. We have consumer protection laws on the books that regulate and protect us from the ingredients in the food we eat to the furniture we buy in our homes, but prior to 2009, little if any regulation or concern existed regarding the standards used by credit card companies in providing consumers with credit and then the manner in which interest charges were incurred. Given the abuses rendered by credit card companies, Congress enacted and President Obama signed into law the Credit Card Accountability Responsibility and Disclosure Act of 2009 (also known as the Credit CARD Act of 2009). See http://www.creditcards.com/credit-card-news/assets/credit-card-act.pdf.
An excellent discussion outlining the changes in the way that credit card companies may be able to increase credit card interests rates are set forth in http://www.creditcards.com/credit-card-news/help/what-the-new-credit-card-rules-mean-6000.php
I have five (5) children all of which have now graduated from college. One of my children while in college came to me with an offer she had received from a credit card company while she was in college that provided her with a credit limit of $19,000.00 at a time when she had no job and no prospect of a job while she was attending college. I told her that there are times in which applying for credit was a necessary part of life, e.g., the acquistion of a college education; the purchase of a home; and the purchase of durable goods that last longer than 3 years such as a washing machine and dryer and/or a car. However, many people become enslaved by credit "Masters" by charging such things as their groceries on a credit card or other nondurable goods only to have enormous interest charges racked up thereafter.
Imagine going into a store and observing a "blue light" special where the store announced that everyone in the store could purchase an item for X dollars, but for you ... the items would cost you X dollars plus 25% or more!!! Most intelligent beings would run not walk out of the store under such a pretense. However, that's exactly what happens in many cases when we purchase items with a credit card!
What we all need is a dose of reality here. There are many people who tout themselves as financial consultants, but it is up to us to research as consumers those individuals and carefully select one who will help us in our financial planning. Fail to plan, plan to fail. Hence, consider carefully your plans when it comes to your financial future and the acquistion and use of credit.
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