Tom Petruno of The Los Angeles Times has written an insightful article in that publication. In his article “Banks threaten consumers over new credit card rules,” Petruno reports that the banks are angry about the new credit card rules Congress is imposing on them.
Their irritation has come after the Senate weighed in on the reform with a vote of 90-5.
Bankers are angry that Congress is getting involved in limiting the timing of interest increases as well as fees.
Congress is saying banks must give 45 days notice before raising interest rates. They currently only have to give 15 days.
The American Bankers Association indicated in a statement that they were “concerned” that students, consumers and small businesses will not be able to get credit cards.
That wasn’t a statement. It was a threat indicating that the reason they won’t be able to get them is because the banks will retaliate by charging large annual fees. A point not lost on Petruno.
However, if you aren’t already aware of it there is a “process” going on with banks. Let me see if I can think of a word, uhhh, yeah I’ve got it, it’s called a “predatory process.”
See the bank markets credit cards. Often they market a lot of other stuff too like insurance or shopping programs. Further they often give credit to people who have no business having a credit line. But the bank knows they can milk these people for a lot of money before they ultimately cannot make payments.
That $39 late fee when your payment is 10 seconds late is not at all reflective of what it costs the bank. It goes right into profit.
Actually what it really does is offset the cost of not charging certain people an annual fee; these would be people who the bank really wants, with money and good credit.
Further that is why people with money aren’t really for these measures.
Petruno rightly attacks the bankers who say that Congress is messing with the basic banking model. As Petruno asks and I paraphrase, “Shouldn’t balance between fairness and profit be the goal; shouldn’t that be the model?”
My middle son who is now 22-years-old has been getting credit card offers since he was 18. These banks are relentless and some of these offers are ridiculous offering a $500 line of credit and after fees you have an available credit limit of about $100. As soon as you sign up you owe the bank $400, for nothing.
Certainly there are some banks that are reliable but there is a reason Congress is urging this reform and there is a reason the banks aren’t happy about it.