Credit Card Act Might Not Be Enough Help For Consumers

The new Credit Card Act may not be enough to save consumers from some scandalous practices. At least, that’s what the NY Times is saying. We talk a lot about the Credit Card Act here, and for the most part I feel it’s a great thing for consumers. It’s supposed to lead to more transparency in the industry, which is much needed. But apparently it doesn’t do enough.

Research by the credit scoring company FICO shows that in the 12 months ended in April, 58 million people had the amount of available credit on their cards reduced. (NY Times)

Everyone in the industry new that things were going to change dramatically before the Credit Card Act went into effect. Rates were going to be raised and limits were going to be dropped. Fortunately for the consumer, rates cannot be raised without warning anymore, but credit limits can be dropped at any time and for any reason.

If a credit card company lowers your rates, they are lowering your overall available credit which, in turn, can lower your credit score. They will lower your available credit for any reason, or no reason, and you probably don’t have any retaliation other than to close your account, which also might affect your credit score.

So, why didn’t the White House think of adding limitations on the act of lowering your available credit? According to the NY Times, the new Credit Card Act is really just a revised version of the old Truth in Lending Act of 1968. In the late 60’s, credit card companies did not just randomly lower your available credit, so there was no mention of it in the bill. In the last years, when the rewriting of the old bill was taking place, this still wasn’t an issue.

Unfortunately, now it is a big issue. Out of the 58 million consumers who had they’re credit limits reduced, many of them had better than average credit scores and kept a low balance on the credit card. Many who played by the rules were penalized, while at the same time the economy was failing and they were losing their jobs and homes. It’s been a rough year for consumers.

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