Don’t get me wrong, given the amount of complaining from the banking industry, Jim Flaherty’s new credit card rules seem to be a very good start, but I would dearly love to see them go a little farther. My concern is the major problem is still not being addressed, which is the exorbitant interest rates allowed.
Loan Sharks Blush
The rates that Credit Cards charge as regular business while cheaper than seen from the Pay Day Loan world are still completely out of sync with bank rates. They are allowed to inflict this kind of usury on consumers. There are no rules capping the rates that can be charged. I think that is what is missing from this legislation. Allowing unfettered rate increases is asking for trouble.
Better rules for credit limits would be good as well, stopping folks from being able to bump up their limit via a simple phone call seems a dangerous practice as well. If you want to lower your credit limit you have to send in a signed document and such, but to increase your rate is a simple phone call, wonder why that is?
While I know the other issue with credit card debt is that people are using Credit Cards as short-term credit mechanisms (and then turning them into long-term credit vehicles, since they can’t extricate themselves from the debt), and that a lot of the financial pits dug by consumers are self-inflicted, I think the Credit Card companies make this trap a little too easy to fall into.
There was one credit card lobbyist complaining about how teenagers and young folks won’t be able to get credit cards if new rules are put in place. I believe I shouted at the TV, “… and that is a BAD thing?”, so my view is less credit cards to less folks might just be a good thing.
Nobody needs as many credit cards, as we all have!
Other Useful Documents
A useful link for those who are learning about Credit Cards is a document posted by the FCAC called Getting The Most From Your Credit Card. They also have a very good beginners document called Your Rights and Responsibilities , well worth a read as well.