The New York State Consumer Protection Board

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Table of Contents

Introduction
The Credit Card Act to Congress
The purpose and supporters of the bill: Key provisions
The expected consequences and the critique of the bill
The debate in Congress
Conclusions: Likelihood of success
References

Introduction

There were, and still are, many experts and non-experts of law and the financial sector that wonder if its redundant to transform into legislation regulations that are like copy-paste of already imposed rules by banking institutions?!! Anyway, regardless this interrogative point in the minds of many, the newly minted Credit Card Accountability, Responsibility, and Disclosure Act of 2009 was introduced in Congress the beginning of this year.

But, as with any other piece of legislation, in order to better understand this law, why it was necessary and what will its effects be, it is the case to take a look at the circumstances that influenced in its making.

Many agree upon the fact that it was the financial crisis that was the primary factor that led to the necessity of this new legislation. The subprime crisis and the credit crunch made it quite clear that the existing regulations were simply ineffective and with a lot of so called “open spaces” for speculators to profit take advantage from the good faith of others (Cap, 1).

But other scholars and intellectuals do not completely agree with this. They go on in stating that it is not the credit crunch or the subprime meltdown crisis that developed out of the reach of the law and thus made it necessary for it to be changed and updated. For them it is the system which in itself includes these negative phenomena such as the different crisis on the financial sector we have been having the last two decades of the twentieth century and the first decade of this new millennia.

In this respect the previous law played a considerable role in constructing such system, or environment, which in itself includes the advent of these negative situations. We will discuss below about the considerations that are being made for the Credit Card Act of 2009 by the same people on the effects that it will have on our economy and society.

Anyway both parties agree on the fact that the previous regulations were not sufficiently protective of the consumers. Furthermore, there were much (maybe even to much) space allowances for speculations by part of the Wall Street with “Main Street” bearing the most of the consequences (Houston, 2). But the situation created during 2008 had its specific attributes that were considered unlikely from many experts during the prior years to it. Almost every prediction showed a brilliant future for the credit sector and credit card industry in particular. During the years from 2004 to 2006 it even had a boom on credit card applications. The law and other regulations in place seem to function perfectly. Anyone, almost anyone, thought that the market seemed to have been regulated as it should be these rules and laws (Bonner & Wiggin, 4).

And here the next big question is how came to be that the existing regulations and laws led to this situation and at the end of 2008 almost “crashed”?? If the existing laws and regulations were functioning so well, then why did they not include in themselves the necessary tools to prevent these types of crisis from unfolding?!! Many have found the answer to these interrogative points to the fast and unprecedented development of consumer culture that drove our economy at a point beyond regulation.

As Canclini expresses in his work the situation “just went wild and no rule or law could restrain it from developing in what it become” (2008, 16). At this passage the author is talking about the booming housing mortgage market and the subsequent subprime crisis that unfolded because of it. He also refers to the general consuming behavior that the American people have been accustomed to the last decades. And the credit market was the one that was at forefront of this booming of American economy. The credit card industry was expanding at a tremendous rate the last 6 to 7 years before 2008. Everyone seemed to want to get a credit or a debit card in order to take a loan to buy some goods.

According to the neoliberal view, the law should not create impediments between the transaction parties, the credit card issuer and its holder, the consumer. Instead, the law should merely restrict itself in creating the necessary environment that these transactions take place freely. As to whether the conditions and the agreement between the parties in the transaction, for neoliberals the law, and the government in general, should not be permitted to interfere. These were the guiding principles under which the Federal Reserve Board and the United States Government constructed the rules for the credit card industry. The supporters of this strategy prided themselves that this situation has enhanced the credit flow in the economy and by thus enhancing the overall well-being of the every one of the American people (Wiggin & Bonner, 36).

There seemed to be no place for disagreement of this situation and up until the second part of 2008 no one raised the doubts that the rules and regulations for credit cards should be reviewed and changed. It had become a sort of common sense that this was the right way to go forward.

Yet, this was the proof that common sense does not coincide with good sense in all the cases. As Cancilni states:

“How can one make sense of families who squander their Christmas bonuses on parties and presents when they don’t have enough to eat and dress themselves throughout the year? Don’t these media addicts know that newscasters lie and that telenovelas distort real life?” (37)

This paper intends to make an analysis of the Credit Card Act of 2009 just passed a few months ago from the United States Congress. First, in the next section there will be displayed the actions of the Consumer Protection Board of the state of New York which preceded the action in Congress. The actions of the Board and those of the New York State Governor Office became an example to follow nationwide. They served to build up the necessary pressure for federal action. Next, we will discuss the arguments brought forward by the supporters of the bill. This will be done by pointing out the key provisions of this bill and the arguments why they are going to have a positive impact. The other section will be dedicated to the detractors of the bill and their arguments that this law could have negative consequences for the public. The third section will be dedicated to the debate held in Congress for this bill and the final one will be the concluding section.

In this section we will try to reach our conclusions by making a comparative analysis with the Senate Bill 5665A passed June of 2006 which was the previous regulations for the credit card market.

The Credit Card Act to Congress

The New York State Consumer Protection Board and its actions

At the end of the last year, 2008 and the beginning of this year, different voices that asked change in the existing laws and regulation began to emerge. Many public and political figures expressed in favor of radical changes in legislation and a more consumer-protection focused rules.

Among these voices the New York State Consumer Protection Board was one of the most active not only in public speech and consumer alert notifications but in practical actions too. In this consumer-protection campaign they were joined by Governor David A. Paterson. At the end of 2008 the New York State passed a new Consumer Bill of Rights in an attempt to respond quickly to the financial crisis that had emerged. This New York Sate Act was designed to increase consumer protection in the paid income tax preparer

industry and impose disclosure requirements on them (“Consumer Bill of Rights”, 1). After the passing of this bill the office of the Governor also announced that soon the State Senate will be introduction with more new legislation in protection of the citizens and consumers. This new regulations will have the duty to assure that New Yorkers earning less than $60,000 annually will be “eligible for the federal and State EITC which can range from $569 for an income-eligible individual with no children, to more than $6,000 for families with two or more children. The notice from employers, in conjunction with W2 forms, can be sent via mail, e-mail or by in-hand delivery” (“Press Release”, 1).

Anyway, it should be noted that many sections of the bill along with new regulations would take effect on January 1, 2010. It will be a gradual enactment of the law to ensure that no immediate shock happens to the market and by doing so, negatively affecting the public. It is the case to mention that Governor David A. Paterson and his aides have been trying is identifying methods of addressing the national economic crisis, which was beginning to heavily affect New Yorkers since September last year. The Consumer Protection Board also began contributing with new and innovative resources which were deployed under the form of different programs.

One program to mention is the “Banking on Our Children” program. This program is directed to K-12 based children and aims in developing a new sense of savings in them, something that the consumer culture had almost buried for the last decades. For this purpose a couple of movies were filmed and aired at the public.

The Consumer Protection Board made this videos free accessible and downloadable through their website. These videos were accompanied by hundreds of figured sheets designed for home or classroom usage with the purpose of reinforcing the movies’ messages.

The other video, “The Mystery of the Missing Piggy Bank”, had a more direct message. In it, the child heroine learns the value of saving money when she loses her bank and follows clues to find it. The message of this film is fulfilled by “A Sense of Saving,” where children receive an important lesson on spending beyond their means. Ben Franklin informs them that “a penny saved is a penny earned.” The premiere of the films was held at the NYS Museum, and since that day the videos have received great reviews from the public which showed more interest that it was expected (“Current Features”, 1). The message to these children and their parents was clear: nowadays Ney Yorkers, and all Americans, need to be savvier than ever.

But the Consumer Protection Board had to respond to new phenomena occurring into the “adult world” also. During these hard financial times scammers continued to find innovative ways to capitalize and benefit on consumer hardship. One “sort of scams” was the foreclosure scams which drain the equity in people’s homes.

The Consumer Protection Board had to go on red alert because more than 55,000 New Yorkers called the CPB last year for assistance and information (“Current Features”, 2).

The Board also had to take action to try to protect your online privacy, as information brokers heavily used consumer data to achieve targeted advertising and online marketing. But there was a bigger threat to consumers from the development of information technology, identity theft.

The Consumer Protection Board had to respond quickly to this one as it came out to be the fastest growing crime in America, with New York ranked 6^th nationwide (“Identity theft”, 1). It was found that victims of domestic violence can be more vulnerable to identity theft. Thus they were advised to take a few precaution measures to be more protected against abusers.

The risk was that these abusers may use the personal information they have access to as a means of control or even blackmail (“Identity theft”, 2).

The Consumer Protection Board along with the New York State Office for Prevention of Domestic Violence undertook an awareness raising campaign to inform the public of the tactics scammers employ to open new credit cards in the victim’s names or even open various lines of credit in the names of their children. They can use this information then to withdraw money from ATM’s, purchase items online, etc. These scams are on the increase and, in addition to harming individual consumers, are adversely affecting businesses. The case of McDonald’s is the perfect example.

The Board coordinated efforts with McDonald’s USA to inform and alert consumers of a scam that fraudulently used the company’s name and brand loyalty to “Phish” for their personal information. Both the Consumer Protection Board and McDonald’s had been contacted by concerned customers who had received an e-mail containing a fraudulent offer to credit their bank account with $75 or $80 in exchange for participation in a survey which required disclosure of personal identifiable information (Rausch, 1).

In these cases, the end result is that victims loose their funds their credit rating is destroyed so they find it difficult to take a loan or make any other credit related transaction. There is also the possibility for them of being accused of crimes committed by the abuser which the victims never commit or intended to commit. For the above mentioned reasons:

“The CPB advises victims to respond to identity theft by:

Checking and closing compromised accounts.
Filing police and/or Federal Trade Commission affidavits with credit bureaus and others.
Placing a security freeze and fraud alert on credit reports.
Checking free credit reports regularly for errors.” (“Identity Theft”, 3)

All of these efforts from the CPB of New York had a nationwide impact. Many other governors began to act similarly and the stage was gradually set for an action to be taken at the federal level. Many congressmen and senators of the United States Congress expressed their public support for the actions of the New York State Governor. This increased the pressure on President Obama and all the other legislative branches to undertake a nationwide federal action.

The purpose and supporters of the bill: Key provisions

Gradually, politicians become more active regarding the credit card industry. The sponsors of the bill were Senator Robert Menendez and Representative Carolyn Maloney. Congresswoman Maloney has been in contact with the Consumer Protection Board of New York systematically for the last years, being a representative of the state of New York herself. Senator Robert Menendez is a politician from the neighboring state of New Jersey. He is an old fellow of Governor Paterson and both have been active members of the Democratic Party the last election in their respective states.

On February 6, 2009, Senator Menendez introduced at the Senate Committee on Banking, Housing and Urban Affairs his proposition for the Credit Card Reform Act of 2009.

This Act “amends the Fair Credit Reporting Act to permit a consumer reporting agency to furnish a consumer report in connection with any credit or insurance transaction that is not initiated by the consumer only if the report indicates that the consumer is age 21 or older” (“Bill s.392”, 1).

But what is more important is the statement of purpose made by Senator Robert Menendez himself when he presented the bill before the Committee. According to him this was:

“A bill to protect consumers, and especially young consumers, from skyrocketing credit card debt, unfair credit card practices, and deceptive credit offers”. (“Bill s.392”, 1)

Many democrats in the Senate supported the bill immediately. They so it as part of their agenda of renewing many of the rules and regulations left from the previous administration. The same did most of the House members of the Democratic Party. This bill even had the support of many congressmen, but the majority of them were, at least, skeptic about it. We will discuss this on a separate section below.

On May 22, 2009, President Barack Obama signed into law the Credit Card Accountability Responsibility and Disclosure Act of 2009 (commonly known as the Credit CARD Act). After signing he declared that:

“So we’re here to put a change to all that. With this bill, we’re putting in place some common-sense reforms designed to protect consumers like Janet.

I want to be clear about this: Credit card companies provide a valuable service; we don’t begrudge them turning a profit. We just want to make sure that they do so while upholding basic standards of fairness, transparency, and accountability. Just as we demand credit card users to act responsibly, we demand that credit card companies act responsibly, too. And that’s not too much to ask.

And that’s why, because of this new law, statements will be required to tell credit card holders how long it will take to pay off a balance and what it will cost in interest if they only make the minimum monthly payments. We also put a stop to retroactive rate hikes that appear on a bill suddenly with no rhyme or reason.” (Lee, 1)

Many of the supporters pretend that this new Credit Card bill expands the prohibition against different practices (to be exact five practices) that the OTS and other governmental agencies found to be unfair during last and this year’s inspections. In their concluding reports many of these agencies required that “consumers receive a reasonable amount of time to make their credit card payments, prohibited payment allocation methods that unfairly maximize interest charges and, in the subprime credit card market, limited fees that reduce the credit available to consumers” (“Unfair and Deceptive Practices and Rules”, p. 1).

But this new Credit Card legislation goes further in juridical intervening because it codifies several amendments of the “Truth in Lending” rules that are issued by the Federal Reserve Board of Chairman’s and also imposes some new restrictions on additional practices.

To be more specific, the Credit Card Act will become effective in different periods of time in a phase to phase transition type period. The enactment of the bill through these different phases will help, according to the promoters, to impact the financial and social ambient as positively as it can. The first two provisions will become effective on August 20, 2009, 90 days after the legislation was enacted.

Another additional rule they imposed from the agencies is that they prohibited issuers from raising the interest rate on an existing credit card balance when a consumer is paying credit card bills on time (“Unfair and Deceptive Practices and Rules”, p.4). We will discuss below in details about this.

These provisions contain the requirement that issuers provide 21 days for consumers to pay their credit card bills, and the requirement that issuers provide 45 day notice of changes in the terms and conditions (“H.R. 627 of the One Hundred Eleventh Congress of the United States”, p. 1).

However, most of the legislation will come to effect on February 22, 2010, almost nine months after it was approved by the Congress and signed into law by the President.

The main question remains, as pointed out from the detractors of the bill, if it has the capabilities and tools necessary to fulfill what it was designed for. In order to evaluate ourselves we need to make a text critical analysis of the Act. One of the major sections of the bill is entitled “Customer Protection”, in accordance with the purpose that its sponsor and supporters had. To further our analysis let see in details the major provisions this new Act brings.

In the very first sentences of the Credit Card Act of 2009 we find that it:

“Amends the Truth in Lending Act (TILA), with respect to credit card accounts under an open end consumer credit plan, to require a creditor to provide written notice not later than 45 days prior to the effective date of:

any increase in an annual percentage rate (APR); and
any significant change, as determined by rule of the Federal Reserve Board, in the terms of the cardholder agreement (including an increase in fees or finance charges).” (H.R 627, Section 101)

As we have explained above, the booming of the credit market in general, and credit card industry in particular, led to more power for the issuers of the cards. The companies and banks made different changes in their fee structure during the year, time after time. The problem was that consumers were “constraint” to accept these changes because of the high development of this sector. If you wanted to buy something, or finance something at all, you had to go through the banks and credit card companies. Not accepting the changes and taking actions against the banks, or credit card companies, would bring ultimately more damage to the consumer than to these banks or credit card companies. A certain form of unconscious, silently agreed, “common sense” was created among the public. This situation was more in favor of the business world than the consumers. As long as the credit card had not unfolded many people were unconscious about the negative situation there were already in. a wide usage of the credit cards means being more exposed to financial shocks.

In the second part of 2008, many people began to feel the effects of the financial crisis. They found themselves into a “locked in” situation where they had to pay significant amount of fees all at once. These fees combined together came up to be an unbearable weight for the month budget of many American families. This is why one of the key provisions of this new credit card act is to oblige card issuer to inform in advance their clients of any change in terms of the cardholders’ agreement. This way the consumer will have the opportunity to decide whether to agree or find other solutions.

But it not only obliges issuer to inform their client but also imposes certain limits for the increase of interest rates and other related finance fees on a credit card account before its renewal date. The only permitted increase in an annual percentage rate is in the form of a penalty.

This penalty is only for “specific, material contract violations of a consumer directly related to the account that are specified in the contract as grounds for an increase” (“Bill s.392”, 6). Furthermore the credit card act of 2009 completely bans and declares illegal retroactive rate increases by the part of the issuers.

Another key provision of this act is that it prohibits a credit card issuer from changing the terms of a credit card agreement with a customer:

“before the scheduled contract expiration or renewal date; and
until the issuer has published all contract changes in any mandatory disclosures.” (“Bill s.392”, 4)

This provision is related to the previous one regarding information action that issuer should take in case of changing their fees.

Another provision that was lacking in previous regulations is that now a cardholder has the right to repay all existing balances on an expired credit card account according to the terms of agreement that was effective before the expiration of the card. This had become a nationwide problem for many Americans. During last year many people were late to repay their credit card balances and, when they had the possibility to repay, they had to do so with new rates. These meant that they had to pay more than what they owned the companies the moment their credit card account had expired (John, 1).

Yet another very important provision that this bill makes is that on personal privacy and information scamming. Many supporting figures of the bill emphasize this fact (Faircloth, 2).

This bill makes it a requirement to the credit card issuer to verify when the account is opened that the client is, and will be, able to make the necessary payments, and in accordance with the time limits agreed upon.

The same verifications should be made if the balance is increased by part of the customer. This evaluation process from the credit card companies should be based on the consideration of current and expected income of the client, his/her current obligations, and employment status (Lee, 2).

All of the above mentioned provisions are considered to be very strong arguments by part of the supporters of the bill that this law was not only necessary, but it will also better regulate the relations between companies and customers for the future. According to them this new Credit Card Act will act as a shield for the consumers in future financial shocks of the market.

The expected consequences and the critique of the bill

This bill has shown to have so many provisions and new tools in help of the needy. But still remains the question whether it will positively affect the social and economic structures of society on the long term. The main critique for this law is not about the law itself but about the principles behind it. Many opinion makers, politicians and scholars have argued that this sort of regulations promote shunning individual responsibility. They enhance the role of governments as “saviors” and by doing so demotivate people to step up personal responsibility. The critiques state that this bill will effectively become a sort of individual “bail out”.

The problem is that the part of the population that is financially more literate and straight will have to back up the rest that has problems. It is a sort of taxation to that part of the population that have not “abused” with their credit card in order to “save” others. First of all it is a moral problem, if it is good or bad to help people which have chosen themselves to be in that particular situation. Second of all, it is a justice-juridical problem. Is it right to make it a law that particular groups of the population will be allowed what other cannot?

Does this mean that anyone can behave as wishes financially because he will be backed up by others anyway? One example that the detractors of the bill give is that of the claim that this bill, among others, will benefit students.

As a reader in a financial website points out:

“You really have to wonder if college does much for students. Maybe degrees are over-rated. They are spending upwards of $40,000 for a college education (at a state school), but they can’t figure out that eventually they have to pay for that pizza they just bought with a credit card. Ignorance isn’t an excuse. This isn’t a hard concept to grasp, especially for someone at an institute of higher learning.” (Patrick, 1)

Thus the law will further enhance this general attitude that is the cause of the problem in first place. Some other critics dismiss this law as just another form of “vote pandering” by part of the government. One must not forget that it was the government and Congress, when both parties had majority, which backed the banks and other financial institutions by giving them billions of taxpayers’ money. And the same people that rushed to save them now are accusing these institutions of unfair and deceptive practices. This situation will just make companies to find alternative ways to impose their fees. The risk is that they will extra charge that part of their clients that are correct in their payments.

Yet another concern is that raised by some small business groups which have opposed the move of the government. Raymond J. Keating, chief economist at the Small Business and Entrepreneurship Council, says that:

“These regulations risk choking off an already-tight credit market. If you step in with legislation like this, where it’s tougher on companies to price risk into the equation, the real risk is they’re going to pull in on credit.” (Faircloth, 4)

This situation can decrease and slow down the credit flow throughout the economy. But credit flow is vital for small businesses who want to expand. If it slows then the business world will slow down with it ultimately having a negative impact on individual consumers.

The debate in Congress

On April 30, 2009 the House of Representatives of the United States Congress passed the Credit Card Act bill by roll call vote. The totals were 357 Ayes, 70 Nays, 7 Present/Not Voting. Following, on May 19, 2009 the bill passed in the Senate also by roll call vote. The totals were 90 Ayes, 5 Nays, 4 Present/Not Voting (“H. R. 627”, 1).

As the numbers show, this was a bipartisan, strongly supported Act. Both parties worked together on it. In fact, since it was referred at the Committee there were 89 amendments proposed, most of which were bipartisan amendments. But this does not mean that there was no debate regarding this bill. The floor was opened by one of the co-sponsors of the bill, Congresswoman Maloney.

“We held numerous hearings and meetings, and came forward with a set of gold principles that many issuers have voluntarily followed. Today’s bill is another step forward towards making these protections permanent, and importantly, we expand upon them in a number of key areas to provide consumers with additional protections.” (“General Debate”, 1)

After reviewing the principles behind this bill she pointed out that:

“This is not a bill that takes away consumer choice or that infringes on anyone’s rights. It simply says it is not right to be deceptive, to be unfair or to engage in anticompetitive practices.” (“General Debate”, 1)

She wanted to emphasize this fact because of the many critiques received during the preparation of the bill that ultimately it was going to harm the people by limiting their individual freedom. Rep. Spencer Bachus took the first stance from the detractors of the bill.

“We’re in the midst of a severe economic downturn. Unemployment is up. Hardworking Americans are facing unparalleled difficulties. Now, if a credit card company doesn’t treat them right, they just add to those difficulties. But if we over-restrict these offers of credit, put too many conditions on it, we’ve been told that the credit limits are going to come down… yes, there will be people, if this bill passes, that will receive a lower interest rate or their interest rates won’t go as high. But there are other people, I think a far greater universe, where the interest rates will go up on people that pay on time, people that have better credit, and that this is sort of a leveling, and I think you’re going to see that interest rates are going to go up from 10 to 12 percent.” (General Debate, 2)

His stance shows the basic principles of critique that many people had against this law; the fear that this Act could have a sort of backlash-boomerang effect. Instead of helping people it will ultimately end up harming them on the long term. as mentioned above there are also critiques that see this bill as limiting and unfavorable for the small business world. There was a general sense of “fear” that this law could disrupt the market balance among the detractors of the bill. Rep. Jeb Hensarling expresses his concern that:

“… ultimately what is unfair, what is unfair, Mr. Chairman, is in a time of a credit contraction to reach into people’s wallets and take their credit cards away. Ultimately, that is what this legislation will do.”

And this because:

“People are counting on these credit cards. Risk-based pricing. You are taking tools away from those who use it and you are leading to two consequences. Either, number one, half of America is paying their bill on time and you are going to force them through this legislation to bail out the portion of America that doesn’t; and for those who are struggling, you are going to deny them credit card options… in a free market, people ought to have consumer choice and they ought to be able even with a checkered credit past to get credit.” (“General Debate”, 5)

These are interesting concerns that the market will get out of balance, but as Rep. William Pascrell points out:

“There has to be a balance, and I would agree. The question is we’ve gone out of balance, and no one can deny looking at the data of the past 20 years that we have reduced our standards, there have been financial products that nobody has overseen, and I place the blame on both political parties.” (“General Debate”, 6)

As we can see from the debate that took place in Congress, both parties agree on the fact that consumers wellbeing is on the line here. Their difference is whether this law addresses correctly this problem or it will just make it worse. If we carefully study the stances of both parties we will find that both have reasonable arguments that stand. It is difficult to point out any unreasonable claim from both sides.

Thus the problem becomes more complicated: if they both are right on what are saying, then how is this law going to impact the social public world, the society?

Conclusions: Likelihood of success

Still to this day the debate over the effects of the Credit card act of 2009 continues to be part of the agenda of the media, national or local. Either is the case, this debate will continue at least until the full implementation of the bill in mid-2010. But there is one point that both parties, the supporters and detractors, do agree: this bill was a response to the financial crisis that unfolded in 2008. Another point that they agree is that this crisis had to have a response by the federal government. It is the form of the response that they disagree upon.

So the question remains: is this new credit card act going to be successful or will it be just another legislative and political tentative to convince the public that something is being done? This question can only be fully answered in the next year, 2010. Meanwhile, all we can do is an analysis of the present situation and discuss on future expectations. Many of the future expectations have been mentioned above. The supporters make the claim that this bill is going to change the focus from profit to the consumers. The biggest positive expectation is that the bill will oblige the credit card issuing companies to be more customer-care oriented. On the other hand in provides people with the guarantee that the law provides them with support and coverage from the ill intentions of scams or fraudulent companies. This way everyone can be sure that the government will exert its legal power upon every company that tries to yield unfair profit from individuals and families by raising fees without notice or consent, for example.

But that is the problem for the detractors of the bill. And mainly it is a problem of principles. By ensuring people that the government will “look their back” this law will increase their level of irresponsibility. This way people’s personal responsibility will decrease because they would feel more “secure” in the hands of the government. The creation of this situation could be dangerous because it can harm individual liberties. Now the government can have more power to manage the transactions of people in the market. The individual liberty of having an agreement with a company for a credit card will not be bi-partisan anymore, between you and the company. Now the government will be, sort of, part of this agreement.

Another expectation is that the law will become de facto unfair to different categories of society. The fear is that part of society which is correct in its payments and has no problems with its financial balances will have to bear the fiscal weight of the rest which are financially unsound. But why should one bear the weight of the errors of the other??

There have been previous tentative to safeguard the consumers. To be notes is the one by the state legislation of New York in 2009, the Senate Bill 5665A. One of the provisions of that local bill was that it outlawed the use of universal default, a commonly used and relatively unknown practice by credit card companies. This practice was used to increase credit card rates based on a card holder’s unrelated financial activity. New York is the first state in the nation to provide such a protection against this deceptive practice (John, 5). This is similar to the credit card act of 2009 we are discussing. Just this time this Act of Congress makes it a nationwide law.

In simple words, the “universal default” was a breach of contract by part of the card issuing companies that allowed them to change the terms of agreements with consumers at will. This comprised the increasing of fees. Similarly, the new Credit Card Act of 2009 obliges the issuing companies to inform their clients, at least, 45 days prior to any change and not change the fees above certain limits. But the main similarity between the two bills remains that they take the focus to customer protection.

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