Credit Card Regulation–New Proposals a Step Nearer

Representatives of the Senate and House pulled an all-nighter on Thursday/Friday to resolve their remaining issues with the Dodd-Frank Wall Street Reform and Consumer Protection Act, which includes a number of credit card regulation provisions. It is now hoped that the bill will reach the President’s desk for signature early next month.

In a statement issued yesterday, the House Committee on Financial Services sought to justify the new measures, saying:

We must restore responsibility and accountability in our financial system to give Americans confidence that there is a system in place that works for and protects them. We must create a sound foundation to grow the economy and create jobs.

Credit Card Companies Relieved

However, it is still unclear just how effective the legislation will ultimately prove. One commentator called it a 2,000 page memo to federal regulators that only empowers–rather than requires–them to act. And, earlier this month, Elizabeth Warren, a Harvard professor and Congressional Oversight Panel chair, told Fox Business that the consumer protection elements of the new law will only work properly if those who head up the regulators are prepared–as some of their predecessors haven’t been–to side with the public against powerful financial institutions.

Credit card companies and other financial institutions were happy that the regulations were less tough than some had predicted. On Friday, the Associated Press reported, “Bank stocks soared as investors appeared relieved that the rules were not as strict as they’d feared.”

Credit Card Use Protections

According to yesterday’s House Committee on Financial Services statement, among many other things, the bill:

Creates a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.

However, just how valuable the new law’s protections for credit card users will turn out to be is likely to depend entirely on whether that watchdog learns how to bark–and bite. Credit card companies, with their armies of lawyers, are notoriously adept at finding loopholes in regulations and it would take a nimble and tenacious canine to contain them.

Credit Card Rewards Still at Risk

Although the new bill does not seek to regulate “interchange” or “swipe” fees (the cut credit card companies and payment networks take from every merchant credit card transaction) on credit cards, it does do so on debit cards. And, as many credit card companies are also banks, that may well mean some juggling of revenues and cutting back on some credit card rewards programs.

More on Credit Card Rewards

One person who already has issues with his card’s rewards program is Adam Lasnik, who’s a web master and program manager for Google. In his personal blog, which was picked up by Payment News, Mr. Lasnik complained not about the actual rewards he was receiving, but about his card issuers’ marketing. When one of his Chase credit cards was upgraded to the company’s Ultimate Rewards program, he received a glossy brochure containing 23 pages of information that could have been summed up in a very few paragraphs. He said: “I’d rather Chase, oh, I don’t know, cut out the lame marketing, saved a bunch of money on postage and stopped filling our landfills with stupidly wasteful mailings.”

Published 06/28/10 (Modified 03/24/13)