Credit Card Regulation to Tighten?

Last Thursday, the U.S. Senate followed the House’s earlier lead when it passed the new financial reform bill. The law now goes to the President for signature, but some are warning that it could be years before credit card users see much benefit.

Certainly, banks and other card issuers were worried that this new round of credit card regulation could hurt them. A New York Times editorial last Thursday reported figures from the Center for Responsive Politics that estimated that $600 million had been spent by the financial sector in attempts to weaken the bill’s provisions. Of course, the law covers a great deal more than just credit cards, and much of that money would probably have been spent lobbying against other measures.

What’s New?

From the point of view of credit card companies and their customers, the key part of the new law is the creation of a new consumer financial protection bureau. The Times thinks this is a great step forward, saying in that editorial:

The new consumer financial protection bureau established in the bill is a milestone, not only for its intent and power to rectify lending abuses, but because it will institutionalize the insight that the safety and soundness of banks cannot–and should not–be measured by profitability alone, but by the impact that bank practices ultimately may have on consumers.

However, others are less optimistic and some say that the new bureau’s effectiveness could depend on the will of those who run it to take the consumers’ side against the banks. Given that many executives are expected be brought in from existing financial regulators that have less than heroic track records when it comes to this, those with credit cards should, perhaps, not hold their collective breath.

Some Specifics

Supporters of the legislation hope for two principal outcomes:

1. Greater clarity across the board–from the credit card application and agreement through to statements and notices of changes.
2. Agility on the part of the regulator to close abusive loopholes (without the need for new legislation) as soon as credit card issuers begin to exploit them.

Critics say that it could eliminate many of the existing differences between credit card offers, thus closing down much of the competition that currently exists between issuers.

Student Credit Cards

This is the time of year when those who are heading off to college for the first time, and who have yet to apply for credit cards, should begin to research the market. The Credit CARD Act of 2009 has added extra protections for young people (see IndexCredit Cards’ news items), but nobody should think that’s a reason to take less seriously the task of finding the right fit between card and kid.

If you’re a parent with offspring who are in this position, you now have much more control over the choices made than you used to. You need to decide whether you think your son or daughter would be better off with a prepaid card, a debit card, cash, an authorized user card on one of your accounts, or a full-blown card of his or her own.

If you decide on the last of those (and do your research before you reach any conclusion), you may find it worthwhile checking out the following student credit cards.

Published 07/19/10 (Modified 04/02/13)