Can you tell me more about the new laws governing and regulating the credit card industry?

As expected, President Barack Obama signed the credit card consumer bill of rights sent to him for his signature by the US Congress recently. President Obama’s signature makes this passed bill into law. The bill of rights targets and puts limits on the fees and interest rate hikes that credit card companies have routinely and deceptively sprung upon their customers in the past. To many in Congress and around the financial industry, these limits and changes are simply common sense and designed to protect the American consumer.

The bill outlaws certain practices that the credit card industry has used liberally in the past. This includes double billing late fees and retroactively raising interest rates immediately on past unpaid balances. The bill now requires that the credit card company gives their customers a 60 day notice before raising any interest rates on past balances, as well as returning the customer to his old interest rate should he pay at least the minimum balance payment required for a period of six months.

Even with these new regulations upon the credit card industry, lawmakers stressed that the bill is intended only to limit credit card companies to fairer practices and is in no way giving consumers a free pass on not making their payments and paying off their balances each month as much as possible. These new laws and regulations will enable those consumers looking to takes responsibility of their finances to have a fair shake at doing so.

This new credit card law is the first of such measures affecting the credit card industry to be passed in 20 years. These measures are described by many as an effort to return the American credit card market to fair and transparent business practices. Many of the banks and credit card corporations were against the passing and signing of the bill, stating that it would increase the costs of operating credit card accounts and actually make credit accounts less available to the common US credit card consumer. In the past these objections by the large banks have largely prevented any measures from passing, but with the current economic climate and pessimism, many saw these reforms as inevitable and necessary.

The most of the bill will take effect in February 2010, with some parts of the bill’s stipulations going into effect in 90 days now that President Obama has signed the passed bill into law.

What’s next? Are there going to be more bills passed to further regulate the credit card industry?

Although many in and outside the financial sector hailed the bill as a step in the right direction, many also agree that the bill does not do enough and that more action on the part of Congress and President Obama is required. Congressman Dodd, who authored the bill that was just signed into law, now intends to look into new measures to further regulate the credit card industry. A major issue is placing a cap on the interest rate that a credit card company is allowed to charge. In the past, they have to allowed to charge whatever rate the customer will agree to with no maximum cap, whereas the loan industry is not allowed to charge more than 15% interest rate. Many see the lack of credit card interest rate cap regulation as ludicrous, and Congress will be looking to address this issue next.

Are these new laws and regulations going to benefit the American credit card consumer in the long run?

The lawmakers had their hearts in the right place and attempted to pass rules and regulations to help people get a fair shake and make the whole credit card market more transparent. However, only time will tell whether the measures will results in positives in the end.

Nay-sayers along the way have warned that these restrictions on the credit card industry to hamstring them and make them less likely to approve new credit card accounts especially to those who need the credit the most. Also, credit card companies can just set higher rates and late fees at the start which will hurt consumer options. Lastly, credit card companies may choose to charge higher rates and premiums for the privilege of being able to accept credit card payments by businesses, passing along costs, and hurting small businesses revenues and profitability.