Cramer: New Credit Card Rules Not Tough Enough

I’m an old newspaper guy. So when the media come out with a David vs. Goliath piece on how the U.S. government, on behalf of the consumer, is going to hammer the credit card companies, I applaud it.

But I also take it with a grain of salt.

Case in point: USA Today came out last Thursday with a piece called “Feds adopt rules to crack down on some credit card abuses.” In it, the paper points out that the U.S. Treasury Department is about to change the credit card playing field, issuing new rules that:.

• Change the timeline in which card issuers could change interest rates. Under the new rules, payment could not be deemed late unless the borrower is given a reasonable period of time, like 21 days, to pay.
• Change credit limit penalties. Now, card companies can’t spike interest rates because a cardholder overshot the credit limit solely because of a hold placed on the account.
• Eliminate double-cycle billing, where card companies manipulate payment dates to put them in a better position to apply payments that maximize interest penalties
• Change the rules on how card companies can add “security” fees for issuing credit
• Change the face of your credit card bill. From now on, credit card statements must clearly list the date (and time of day) that a payment is due. Plus, any changes to your card must be listed in bold and not be buried in the fine print.
• Eliminate “universal defaults”. This one is long overdue – it ends the practice that enables credit card issuers to hike the interest rate on one card if you neglect a payment on another card.

It’s all good stuff and the USA Today piece, along with all the other stories I saw on the topic, have the requisite “it’s a great day for consumers” angle. Certainly, credit card companies need to be held accountable for their institutional arrogance. The mindset that card issuers can raise consumer rates with impunity, even if a cardholder is in good standing, was a terribly misguided one. Especially in a recession where people are hurting for cash.