Dude, lame lame LAAAAAME picture.

The Fed should mind its own business.

of 2010

Was that year added after your comment was posted, or, did you not read the article, too? :-)

Not only do I not think this will be a win for me, I expect it will be a FAIL. If banks can't make as much money off people who carry a balance, then I wouldn't be surprised if they stop giving me back 5% of my gas and grocery purchases and 1.5% of everything else.

@pal003: No it's not a joke, it's a fact. That's like the government passing a regulation telling you that your house (which is in a community flood zone) no longer meets code b/c they are now REQUIRING you to be at a certain elevation.

You knew you were in that flood zone the entire time so why don't you raise your house to meet code? You should be able to do that in 24 hours like mortgage lenders did right? Oh what's that you have to hire a contractor, get permits, design the infrastructure to raise the house, and then test it before you move back in?

Consumers need to use common sense. Companies aren't out to get consumers, they are out to make a profit. Sometimes businesses are unscrupulous but most of the time it's just ineffective policies and bureacracy that causes the problem.

BTW, Bank of America's costs to implement these regulations are $150MM and will take hundreds of thousands of man hours to design, build, test, and train.

@joeblevins: It's like telling a rapist- "You need to get off that person! ...in 30 minutes..." Did these banks need a year and a half to "adjust" before they received billions of taxpayer dollars?

I love to piss them off by ALWAYS paying the balance in full on both my cards.

@johnva: Free, at-will access to credit reports would be great. And also stricter penalaties for innacurate information - printed on or reported to a credit report. Give them a little time to correct errors reported to them, and after that make them pay.

I feel extremely uncomfortable whenever I think of the credit reporting system - on a very basic level, it troubles me. This is information about my transactions - conducted by *me* - yet everyone else gets to buy, sell, and misrepresent it for their profit, leaving me to just complain ineffectively. The individual should be a bit more empowered.

The system is very poorly monitored. I've been unsuccessful in convincing any of the 3 of them that I am NOT married to my aunt. She did co-sign for a student loan for me, way back, but they are convinced that she is my spouse. This persists, despite the facts:
1 - I am female.
2 - She is married to my uncle, and this is on her credit report.

Apparently, gay marriage bans and anti-polygamy laws have no bearing on the credit agencies. I'm curious to see what happens if I do get married....

@johnva: Id go one step further, and say that some subprime groups SHOULDNT get credit (until they get out of that financial grouping). It actually could help them, because everything would have to be cash (not spending more than they earn), they wouldnt/couldnt have to pay rediculous interest rates, etc. Maybe Im too much of a fiscal conservative...

@mythago: I bet you also feel like the banks are to blame that people took out mortgages they couldnt afford.

What Im saying is when you sign your name on a document, you are legally agreeing to said terms in the document. If you dont like those terms, dont sign. Its VERY simplistic. As I dont have a infant child, I would be quite fine with that provision you listed.

@Erwos: Making excuses for credit card companies? That is fucked up.

That was my reaction. Credit card companies don't make money off me (well, beyond merchant fees). I make money off them by using reward cards. And if they don't have the money from high fees on people who don't pay off their balances, I'm guessing they will also have fewer perks for those who do.

Well, they expect us to accept new interest rates, and better yet, new PAYMENT DATES without any notice. I think it would be fair.

@mythago: So it's your opinion that the people who used the banks money should be able to whine that the interest rate that they have been raised to is too high despite the fact that the bank told them UP FRONT that they may be charged this rate in the future?

Do these people at any point share in the responsibility of paying back the money the borrowed, including the interest they agreed to pay? From your argument it appears that they are all victims of the "evil corporations mannnnnn" and the government should step in and penalize the bank for abiding by the terms of the contract of the loan they put together. This is dumb.

Do you think that it's awful that the government does not allow banks to send loansharks to your house to break your kneecaps if you pay your credit-card bill late?

I don't think you understand what I'm saying. You are not realizing the point I've been trying to make. These new laws are going to end up making credit tighter for EVERYONE, not just the dummy who runs up his credit card bill and can't pay for it.

O, the horror of interference in the free market! Damn you, government!

No you don't get it. Government interference in the housing market via Fannie and Freddie has contribute to the fiscal straightjacket we're in now. I am not arguing that there shouldn't be regulations, but you can't regulate away greed and stupidity without completely eliminating personal responsibility.

#) No more sending people fake checks.

#) No more sending people fake cards.

The current system is poorly monitored (how many times do I need to inform Experian that I am not actually a 51-year-old man from the other side of the country, and that I have never lived in city X or had an account with lendor Y?) and providing information to consumers should not be a money-making venture for reporting agencies (encouraging a lack of transparency). Unfortunately, and oligopoly of three colluding entities controls this process, so it is beyond the cleansing cloth of market forces.

Let us know what you think..

@oneandone: In May, they knew that *some part of this* might actually be passed. They didn't know the *exact* details. And no company is going to spend the money (and staff time) on reprogramming to give 45 days notice of a rate increase when it's possible the final reg will say 30 days or 60. They're not going to spend the resources to separate interest on balances by purchase date when they're still fighting to have that taken out of the regulations.

And once they have actually done the programming, the amount of time it takes to properly test the system is pretty significant as well. If they don't devote the time to testing, there will be a LOT of unhappy customers when the system glitches and messes up thousands of people's bills.

@mythago: YES. And the great part about the final rule is that it gives great background on the whole process, summary of the comments on the proposed rule earlier this year - and it's in pretty straightforward language.

It also gives you the docket # - OTS-2008-0004 (does this mean OTS had only 4 regs in 2008?). If you go to www.regulations.gov and enter that docket #, you get pdfs of all the public documentation on this rule - the proposed rule, and all the fun, fun comments. A lot of the credit card companies weighed in, obviously. It could be fun to poke around and see what their reasons are.

So far, the most interesting excerpt (from the CEO of Citizens & Northern Bank):

The proposal also addresses "holds" on debit card transactions. Current rules governing this
topic in the payment card industry are extremely difficult to understand even for those
employed by financial institutions. The proposition of programmatically addressing the various
processing permutations would be a nightmare. The prospect of clear disclosure is
unimaginable.

What kind of industry is this where even the *prospect* of clear disclosure is unfathomable??

Do you think that it's awful that the government does not allow banks to send loansharks to your house to break your kneecaps if you pay your credit-card bill late? O, the horror of interference in the free market! Damn you, government!

@KStrike155: It's actually only (only!) 284 pages long. Double-spaced. It's written in plain language And that's the whole rule, with the preamble and everything.

The actual reg text is much shorter - 40something pages. It starts on p.241.

[files.ots.treas.gov]

@Saboth: Now I'm getting worried - I opted out too, and spoke at length with the CSR. I probably should have gotten something in writing (I'll put that on the to-do list...) but my understanding was that opt-out meant:
1 - keep existing APR on my balance
2 - continue to use the card, under my original terms, until the card expires (mine does in 2011)

Now I'm getting nervous, since I recently bought something with it. Not the amount I usually get - I'm switching loyalties to another!

@Optimus: This is not a law, it is a regulation. Offices in the Treasury Dept and probably the Office of Management and Budget wrote this. It actually has nothing to do with Congress - though they could change the statute Treasury is working under to give it more authority for faster action. But they didn't write this and have very little to do with the timing - this is the White House timetable.

@Erwos: No, but you can expect them to comply within 90 days of publishing the new, final regs. This is true for a lot of regulations - sometimes it's 90 days, sometimes 180. Sometimes longer. But they've known about this for a while - The rules were proposed in May, and they're only being finalized now. So they've had time.

I'm not defending the use of CCs for every little thing, far from it. But I think it's all too easy to hold all customers (supposed bad money managers) entirely accountable for their situations, when credit card companies are complicit in creating said situations.

@Nicholas Roussos: It is a HUGE undertaking for financial institutions to actually implement these rules in their systems. (It also costs them millions of dollars to maintain this compliance)

For instance, Bank of America doesn't have the infrastructure to be able to track balance and interest rate by time of purchase. Yes they make more money when they increase your % b/c past balances apply, but it is because currently their card systems don't have this functionality.

In credit card news, that gives companies about 3 months to rob customers blind before finding loopholes in these new protection measures to continue robbing customers blind.

The idea itself is nice though.

@johnfrombrooklyn: I don't know how the OP meant it, but I took this to mean that the free market (which doesn't work, see e.g., Ford, Chrysler, GM, AIG, Madoff, Countrywide, Lehman Brothers, etc.,.) is getting its arse handed to it in the form of a reaction to what has been too unregulated, and thinking people are finally exerting some regulatory control over a system that was off the rails and running over small children.

The free market is a myth. There's no such thing. The freest market becomes the most costly. It's a damn oxymoron.

@Orv: "If banks knew how to manage people's access to credit, we wouldn't be in a housing crisis."

I'm not going to argue whether that's true or not (it's not), but for the sake of argument, do you think the government will do a better job of managing peoples access to credit? Based on the experiences of Fannie and Freddie, this would not be a very well supported argument.

I'm sure the mortgage lenders and banks were able to change their software in 24 hours to accept No Income mortgage applications.

Funny that the SEC could change that leverage ratio from 1:12 to 1:40 - and Goldman Sachs was buying up CDOs and CDSs at 40 times their worth - that very same day.

2010 is another slap in the face to consumers that now gave Citigroup over $340 BILLION of taxpayer dollars - and Citigroup raised their rates - screwing them over twice.

@Acolyte: Excellent! May I skip my next 120 payments then?

The only real, serious problem I have with UD is that it can be triggered by identity theft or erroneous credit reporting (I'm looking at you, medical industry). If they can fix that problem, I'm fine with it.

@mythago: Why do you refer to it as screwing people? Everything is in the paper work when you sign for a CC. They have the right to change interest rates, limit your credit, and etc. Now if you dont like those terms, dont take their card. Its pretty simplistic honestly.

@Orv: What they shouldn't be able to do is go back and change the rate on money they've already lent out. "

But the credit card companies tell you up front (granted no one reads these agreements but they are there) that they reserve the right to raise your interest rates for "the following listed reasons (see agreement)". You agreed to allow the bank to do this. They aren't forcing you to borrow the money, they are just hedging their risks that not everyone is going to pay off their debts.

If you don't like it when the bank raises your interest rate on the balance you carry on your credit card, then don't have a credit card from a bank that can raise your rates for whatever reason.

The idea that the government knows how to manage credit card debt better than the bank who lent it is just ridiculous. Personal responsibility is freaking DEAD.

@IamNotToddDavis: "If the banks can't raise prices on the riskiest borrowers, they will either limit to whom they lend or raise rates on everyone -- or both." As someone who pays off their CC every month, let me declare here: I REFUSE, REFUSE to have to adverse affects on myself because risky borrowers should have access to credit. Basically if youre poor, Im sorry youre poor, but dont buy spinners for your hoop-di. Dont cause my interest rate to rise or limit my credit because of your choices.

Is it possible that whats going to effectively happen when these rules go into effect, that all CC companies are going to have interest rates of 25% or so? I know I got a notice last week from my USAA CC saying they were raising rates (never missed payment, pay in full each month), so I imagine that by 2010 rates will be approx 35% and while you may not have a rate increase on existing balances, you sure as hell will not to carry a balance.

@blitzcat: Regulators - Mount up!

I don't care how big the company is, they can adjust fast -- think of how many companies have suddently laid people off this fall due to the bad economy, most of those weren't planned months, let alone years, in advance.

In this case these negotiations have been going on for a long time and the CC companies have been perfectly aware of what's coming so internally they've probably already adjusted everything they need to adjust, they just managed to get the government to not make them for a while so they can maximize the screwing.

If the new regulations said they have to raise rates and can charge fees for anything they want, they would have been in effect the minute the announcement was made.

@mythago: Ah, so the problem is that "banks go around screwing people by raising interest rates/lowering credit limits for no good reason", right?

Believe it or not, banks did not force anyone to borrow money from them. But if the government forces them to limit their means of recovering the money they lent out, banks are simply going to stop lending as much.

And again, THIS is the biggest current issue with our economy. I don't even necessarily think that this bill is bad idea if implemented at the right time, but this is NOT the right time.

@Orv: Again, I understand that a lot of people think the journal is far to the right, and on many social issues it definitely leans conservative.

But in terms of finance, it is just reporting what is happening in the markets. There is a historical precedent for what the WSJ is saying about this law. History shows that when the government tries to decide at what rate banks should lend money, banks stop lending money, mainly because they can't manage their risk in the way that they find reasonable.

This has nothing to do with right/left. It's a mattter of economics.

I want to see one more change. Any negative charge (merchandise return etc.)should apply towards the payment of your statement balance. Some of the companies do this but not all.

Banks make those decisions because they have chosen to make their money by screwing people, rather than through careful lending practices. The economy is not going to be saved by continuing to allow banks to play "gotcha" games.

@snowburnt: Uh, what? I'm just saying that I'll participate in a system that is fair to consumers. I'm not interested in being tricked for profit, if I carry a balance I'll be more than happy to pay a fair interest rate. Honestly, I'm shocked anyone wants to have a credit card these days under the current rules.

@mythago: I'm aware of the source I quoted as a market-biased source. I quoted them for a reason. The point is that part of the reason our economy is in rough shape right now is because banks did not manage their credit risks. These laws will prevent them from raising rates and lowering credit limits in time to minimize their exposure to bad risk.

I'm sure everyone has a story about getting their rates raised or credit limit lowered without warning for no apparent reason, but like it or not there is a reason. Banks make these decisions so they can limit their exposure to someone who may be overextending themselves. And if the government decides that they will be the ones to tell the banks how they can manage the credit they lend to people, banks are not going to lend as much to people. And THIS is the biggest hurdle our economy has to jump to move forward, freeing up the credit markets. This bill will not help with this.

Maybe so, but your suspicions are meaningless without evidence, and assuming that a blog post is representative of a legal document based on a priori "knowledge" is just plain stupid.

Yes, banks will limit to whom they lend. That's what they are supposed to do, rather than making their money by trying to screw their customers at every turn. Boo hoo for the age of responsible lending. Oh, the horror.

As others have said, policies like this take time to implement. Better late than never.

I know it's possible to have to use CCs, but most people could avoid it with some intentional savings.

Wow, that's funny. When citibank doubled my rate a month ago, despite the consequences, I opted out, but was never notified that any of those things would cancel my opt-out. (Perhaps the fine print would show up a month later).

This may help out those people who have over-extended themselves in debt through credit cards, but for the vast majority of consumers who use credit cards this is going to raise the average rates on everyones cards.

From todays WSJ-

If the banks can't raise prices on the riskiest borrowers, they will either limit to whom they lend or raise rates on everyone -- or both. One study by the law firm Morrison & Foster suggests that the average credit-card interest rate -- which has fallen by nearly four percentage points since 1992 -- would rise by about two percentage points in response to this change. Card companies are also likely to reduce rewards programs and other perks -- which would also affect everyone with a credit card.

Widespread access to credit without annual fees on most cards is a real boon to most consumers. Yes, people do sometimes get in over their heads. And those Truth in Lending disclosures about repayment terms haven't gotten any easier to read over the years. But for the vast majority of Americans who use their credit cards responsibly, credit cards provide a degree of financial flexibility unheard-of in most of the rest of the world.........now seems like a particularly inopportune moment to tell banks that they should do less to manage their exposure to credit risk. Banks are already pulling back on consumer credit as the economy worsens and the credit crisis drags on, with lower credit limits and higher rates. If the Fed votes in favor of its new rules Thursday, expect that trend to accelerate.

I'm not here to defend every bank out there as there are those banks who prey on people with bad credit, but the idea that banks should be stopped from trying to limit their credit risks during this particular economic slump seems incredibly short-sighted.

I know plenty of families for whom a credit card is sometimes their only means of getting necessities. Just a couple months of doing that can shoot your balance through the roof. Hell, I've been in that position myself, in the past. And once you're in, it's the devil's own time to get out again.

Odd...nothing on spending within your means? Saving money to buy something?

If everyone has this kind of an attitude towards it I don't think the credit card companies are in any sort of danger.

Great, but why are they waiting till July 2010 to implement? Send them a letter with 15 days notice like they have done to their customers. There's way too much time built in for the Banks to lobby to have the rules changed in their favor (again).

Snakes have a tendency to dangle the fruit just in view, with promises of freedom from consequences, only to prove afterward that such was never their intent. They'll probably disable this law, just as they did the banking laws, in another 10-20 years.

@tape:

It's logistically impossible to ask that this change overnight. They don't change tax rates on cash registers without substantial advance warning in this country.

The first bullet point is always the trickiest.

All this will accomplish is the big CC companies coming up with completely legal ways to get around these rules. It's feel-good legislation. Congress can pat themselves on their backs, do a high-five and a whoo-hoo! and hope that consumers don't notice they've included provisions that allow the creditors to place liens on firstborn sons and only limit torture by red-hot irons to once every other billing cycle.

But I'm a glass-half-full sort of guy, so I see the bright side of everything.

huh... I just got a notice from my credit union that they were lowering my interest rate from 12.9% to 9.9% on my credit card. I wonder if it has anything to do with me not using it in over 6 years.

Wrong. Not "now," two years from now.

The consequence to some of the more punitive rules is less available credit. I don't think that's a bad thing vis-a-vis individual consumer behavior - I certainly don't like to take on debt personally. That said, there will be a consequent reduction in spending and a downward price impact.

That's not necessarily a bad thing. Debt should be available for high-quality borrowers making large durables purchases, not runs to the store. I doubt carrying a balance on tomatoes or Nikes is beneficial to our consumer. Of course it will also promote unemployment...

I think the first 2 points are good ones in general. The other ones seem very vauge and don't benefit the consumer much.

[www.ots.treas.gov]

You call it "anti-consumer?" Since when were credit card companies and banks about the the consumer?

I bet you do not read your credit card terms either!

And then I read the link. Turns out the Treasury Dept. deserves the credit.

Anyone else expecting their rates to increase over the next six months for absolutely no reason other than the impending regulations?

"Minimum time before notice of change of terms takes effect goes from 15 to 45 days."

So, no, they now MUST give you time to adjust.

@Quake 'n' Shake: notice the provision: "for a hold placed on the account." They don't say no excessive fees, just no excessive fees in that one instance.

A bunch of preliminary articles yesterday mentioned disallowing the "universal default" however; I can't find any articles that mention it at all today. Did they stop "universal default?"

When I worked in retail, do you know how many people I told that "interest rates don't matter if you pay off the balance every month"? Of course, you want a nice one just in case you have to carry a balance unforseen, but if you're trying to build credit get whatever junk card you can and buy gas. ONLY GAS. And pay it off and the interest rate can't do shit. And they were like "you're a genius!"

And none of them knew that - as they all ran up $20k and then just got another card...

We've been living in "credit-world" where you can buy anything regardless of if you can afford it or not - just pay it off later, it won't hurt!

Now people are realizing the consequences of buying wants, not needs, and living beyond their means. Pity they weren't properly educated before it was too late and they took the economy down with them.

One would assume that the actual document this brief article is summarizing provides ample definition of these terms.

No excessive fees for exceeding credit limit because of a hold placed on the account
I like that, except "No excessive fees" is increadibly vague. I suspect consumers will see little change regarding this aspect.

The irony of your comments couldn't be higher. Government regulations telling a private company how to run their business couldn't be less "free market".@HRHKingFridayXX:

I'm going to be a regulator.

Ben, I applaud your optimism. And I hope you turn out to be correct.

Bringing transparency to fees, establishing minimum payment terms, and removing the clearly egregious double-cycle billing practices are all good things; but thanks to the great state of Delaware, CC companies still have broad license to extract Shylock's rates on all revolving debt from people drowning in the deep end of the debt pool.

I think the mid-2010 date was a concession to the Lobbiest. This wouldn't have passed with the CC Banks signoff. Allows the banks to be abusive for another 18 months while gradually introducing these changes ahead of time, but selling it as being 'consumer friendly'

And they state you can "opt out". Hmm...that's great if I want the card with the longest history and biggest credit limit disappearing from my credit report.

@jaydez:

oops.. nevermind.. it's in the full article.

Wait... so they can still raise the interest on past purchases? I thought they were gunan get rid of that too

You're probably being a little optimistic there... However, a lot of the damage from toxic CC debts will probably already be done at that point, and I can't wait to find out what the next economic implosion will be after that!

I'm happy about the new rules. I feel credit card companies exploit people thinking they have unlimited money, then drop the hammer with a 29%+ interest rate.

I have 2 credit cards and luckily I know better. Never spend more than your bank says you have.

Oops. I'm blind.