New legislation working through the U.S. Congress represents the largest crackdown on credit card companies in 30 years. Financial advisor and expert Brad Gummow tells us how the plan could protect cardholders.
Financial advisor Brad Gummow says the legislation would freeze interest rate hikes on existing credit card balances. It would also require card companies to give consumers a 45 day notice of any increase or new fees. Another bonus Gummow says, would end double cycle billing. That’s where companies charge interest on debt that is paid on time. Also, out the door would be charges for customers who pay their bills by phone or online. But Gummow says while the proposal could ease some of the plastic pain for local customers, it fails to address even bigger issues.
“It speaks to how ill prepared people are for economic downturns, and people used credit cards as a source of capital and it’s wrong. It’s absolutely horrible. It’s deplorable that people are going to have this amount of debt at these levels, but on the other hand, investors would argue how can the government tell a company what they can and cannot charge.”
By law the highest interest rate a credit card company can charge a consumer in Illinois is just below 30 percent. The average interest rate charged these days is 10 percent. The house senate is expected to vote on the measure this week. If approved, the rule will take effect in 2010.