Why the Credit Card Legislation Should Pass

Transparency, not caps or limits, are the focus of these bills.

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Over the past two years, lawmakers have debated all kinds of new regulations for the credit card industry, with the goal of addressing skyrocketing consumer debt and the fact that many consumers say they feel deceived by surprise interest rate hikes and fees on their cards. The bill that the Senate could vote on today, as well as the bill passed by the House last week, stand out for their focus on transparency instead of outright caps or limits on what card companies can do. (Proposals to cap interest rates were defeated.)

Both the House and Senate bills require card companies to give more warning to consumers if their rate was going to go up, specify that disclosures must appear in 12-point font (no more itty-bitty writing), and establish standard definitions for commonly used terms such as “fixed rate.” (For a more detailed description of the legislation, please see my previous story, “Credit Card Bill Poised for Passage.”) The Fed already has plans to implement many of the changes itself, but putting the rules into law makes them more permanent.

While those changes aren’t going to stop some people from taking on way more debt than they should (whether through circumstances beyond their control such as high hospital bills or poor decision-making), they will make it easier for your typical consumer, who reads his mail often enough to consider taking action if he notices his interest rate will be going up soon, to avoid some of the stickier situations caused by rapidly accumulating debt. Establishing that kind of transparency seems like a solid step towards created more informed consumers.