New credit card rules: Blessing or curse?
December 19, 2008 by Personal Liberty News Desk
This week, the Federal Reserve approved new regulations for the credit card industry which are aimed at protecting consumers.
The rules, which are set to go into effect in mid-2010, prohibit credit card providers from engaging in practices such as applying all of a cardholder’s payment to the balance with the lowest interest rate.
They also insist that issuers give customers 45 days’ notice before changing the terms of their credit card agreement, among other limits on industry behavior.
However, although consumers may cheer the new regulations, some industry experts fear they will actually have a negative effect on the economy.
Banking analyst Meredith Whitney raised concerns that the move will inhibit consumer spending, reduce the ability of lenders to offer credit and cause them to tighten their lending criteria, according to Reuters.
"This [credit] line reduction will strain credit quality not just for credit card loans but for all consumer loans," she said.
Whitney added that many credit card companies have already been forced to lower credit limits and cancel customers’ accounts, in order to protect themselves from risk.