Bitter sweet victory for consumers: The Credit CARD Act becomes law today

Today, consumers can celebrate a major victory: The Credit CARD Act becomes law, meaning increased consumer protection for credit cardholders. After a year of heightened consumer outrage against banks and legislative wrangling to craft a consumer-friendly bill, cardholders finally receive much needed relief and protection—the most sweeping in history.  However, the victory is more bitter than sweet. It is like winning the silver medal in an Olympic competition that you think you have won.

As evinced by credit card companies raising interest rates and changing terms to preempt the enactment of today’s new law, the victory will be short-lived.  In other words, consumers will end up paying more money through new fees and “legal” changes. If anything, this victory is one of principal more than one of net savings.     

Furthermore, intriguing is the fact that the media are not focusing on how much consumers will save through implementation of the new rules.  Instead, they are focusing on how much credit card companies will loose. This fact is indicative of who is really running the show, as it were. 

For example, research done by the Pew Safe Credit Cards Project estimated that the Credit CARD Act will save consumers at least $10 billion.  There have not been many stories about this or similar research.  On the other hand, The Wall Street Journal estimated that credit card companies will lose $50 billion.  There have been many stories mentioning this figure.  Accordingly, the media’s perception adumbrates a grim reality: Companies will find other, less stealth ways than before, to make up their losses.  If history tells us anything, it is that companies will figure it out—and sooner than later. 

In short, as consumers, we often forget that the goal of credit card companies is to make money, not necessarily to treat customers fairly.  In order to increase shareholder value in this case, they must not only make up current losses, but also continue to grow.  This burden, which has been increased by the Credit CARD Act, means bad news for consumers for a long time to come.

Finally, the long-term, negative consequences of the Credit CARD Act have yet to materialize.  In many ways, we consumers are like Russian figure skater Evgeni Pleshenko.  As we wait for the final score in this battle, we believe that the gold medal is ours.  However, we will soon find out that our efforts were just not enough and that the disgruntlement that often comes with unexpected, crushing defeat will be our fate too.

Comments

[ROBERT]

The new law will assist those that are trying to pay off balances and also give them a better idea of how long it takes to pay off credit card debt. Now is the time to pay off debt and NOT create NEW debt.

[Kevin D. Johnson]

Carole, really? I didn't hear that. That is hilarious!

[Carole May]

Ah, but Evgeny Pleshenko was so ticked off that he invented a platinum medal and gave it to himself. I'm guessing there is no way we can do that.

[Jeffrey Johnson]

I think this act will help consumers alot. Once people see how much it cost to get out of debt and how long I think people will use credit cards less. Mean in 4-5 years what your purchased cost will double if have the average interest rate. In year or two I be done paying off all my debts and plan to never go into debt again. Should of already paid it off this slow economy making it take longer. I started with 15 and down to 3 so I happy with my progress. My monthly minimums 25% what they were when started so really paying them off now.