The Finance Minister’s new set of Credit Card Rules (in 2009) passed their last hurdle and are now in effect. Before anyone starts popping champagne corks, this is not a sweeping set of changes (or even a maximum usury charge), but it is a nice start to the issues.
Some of the highlights of the new credit card rules are:
- An institution may not charge interest on purchases of goods or services made on a credit card during a particular billing cycle if the borrower pays the outstanding balance on the credit card in full on or before the due date.
- This means that if you do manage to pay off your credit card any month the credit card company cannot keep banging you with interest charges, interest charges must stop, good idea!
- An institution may not increase the credit limit on a borrower’s credit card without first obtaining the borrower’s express consent to do so.
- So I won’t see on my credit card bill that my credit limit has increased without me asking to have it raised first.
- Many new better rules about how collections can work, which is a good start as well.
I applaud the efforts to start regulating these modern day “Loan Sharks”, but I can’t help but think there is more that can be done, including useful things like rules about when the credit cards MUST refuse credit to someone as well.
Re: Must refuse credit.
I don’t see this as a good idea, not unless it’s applied to all credit instruments. The fact is that if a bad credit risk is refused a credit card, their next stop is the payday loan store, where the fees and interest are even worse.
And really, as a major beneficiary of credit card rewards, I don’t like to lose sight of the fact that it’s the irresponsible people who are funding my benefits.
I don’t get why everyone calls them loan sharks. If you had 100 million and wanted to loan it to people unsecured and knew that 10% of the people would not pay you back, what interest rate would you charge in order to make an 8% profit before tax?
I assure you, the answer is not prime+2%.
Hence my comment about rules for people who should not be allowed credit cards as well. Let the loan sharks take care of them, they’d learn fiscal control a lot quicker then.