The US administration has passed the Credit Cardholders Bill of Rights to regulate the tactics of credit card issuing companies and to boost credit card transactions in the country.
The US administration is committed to implement reliable and strong protections for credit card consumers but its approach is slightly different, with focus on the elimination of abuses and problems faced by the people, as reported by Xinhua.
The House of Representative passed a landmark bill called Credit Cardholders Bill of Rights on April 30, 2009 to rein some aggressive tactics employed by credit card firms such as arbitrary rate change, double-cycle billing and applying payments to maximize interest charges. With the approval of the Bill by Senate, the Bill will become a law and is likely to be enacted by the end of May 2009.
The Bill is introduced in the Congress to protect the US economy from another devastating hit and to save the American consumers from facing further financial distress. In fact, the credit card issuing companies have recently increased the interest rates for many customers and reduced the credit limits without prior notification following the slowdown in the country’s economy. This practice has had severe impact on the credit card sector in the form of defaults.
We at RNCOS believe that with the enactment of the Bill, the credit card usage in the US will increase as people will give up their fear of being cheated. At present, consumers show less inclination towards credit card usage while purchasing anything as lenders have levied heavy charges and lowered the limits on credit card transactions. Consequently, the credit card transactions have substantially tumbled and entered the negative growth territory. For instance, the volume of debit card transactions at US Bancorp swelled over 2% while the volume of credit card transactions shrunk more than 4% in the first quarter of 2009 against the corresponding period last year.
However, our analysts have identified loopholes in the Bill as it doesn’t include the small business credit cards although these cards are personally guaranteed and follow the same system which consumer credit cards do. This is expected to result in loss of small business credit card market because small business owners will adopt personal cards in their own names rather using small business credit cards.
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