What are consumers to make of the recent changes in credit card rules?
On Feb. 22, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 went into effect.
The changes drew a full range of reactions. Consumer-rights groups cheered them; advocates for credit issuers condemned them. Some local bankers said the changes really didn't affect their business.
Does they really matter to Cedar Valley consumers?
In a word, yes. If nothing else, they may pay a little more heed than before to the risks of credit.
Iowa Attorney General Tom Miller still issued a statement that warns Iowans to note the changes.
"The law contains some very important new protections," Miller said in a news release. "But some of the old consumer tips remain just as important now as before. Shop around for the best card. Read your billing statements every month. Read other notices that might indicate they are changing your credit card terms."
The changes left some experts seething, like John Berlau, director of the Center for Investors and Entrepreneurs. He says the changes are an unnecessary, and potentially harmful, government intrusion into private enterprise.
In spirit, I agree with him. But as a practical matter, some provisions in the new law make sense.
"Congress," Berlau said, "should resist populist proposals that would further distort the credit card market, such as interest rate caps or price controls on payment card interchange fees."
The act will only make getting credit a more difficult proposition for consumers during a time of already-tight credit, Berlau said.
"Ironically, the bill will result in higher interest rates for many cardholders, because it limits the ability of banks to properly price the risks associated with card holders who make late payments," he said.
Perhaps the new law's most reported aspect is the requirement to inform consumers how much time - and extra money - it would take to pay off a balance with just minimum payments.
Berlau calls the law "discriminatory" in that it essentially bans marketing credit cards to consumer who are under 21 years old.
My answer to that: It's about time. College students, who are notoriously broke, are particularly vulnerable to credit card marketing schemes.
Berlau complains that the law denies access to credit to kids who can vote and go to war, as if it's a right. It isn't. Credit is a privilege that must be earned.
Berlau argues that the law deprives college students and other young adults of the chance "to establish good credit and learn how to manage credit wisely."
He needn't worry. These kids will have plenty of time to establish credit after they land that all-important first job.
Berlau also doesn't like the new ban on "universal default," which prevents a card issuer from bumping up rates when a cardholder misses or is late in paying on another card.
He's wrong there, too. If I'm current on one account, it should have no bearing on my relationship with another. Let's put it this way: If I pay off one card, is the issuer of my second card going to lower my interest rate as a reward? Not likely.
No one is more cynical and distrustful than I of government interference in the private sector. But once in a while, a little intervention might be necessary to rein in marketplace excesses.
This may be one of those times.