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Money Matters: Should there be more credit debt protection?

By Lindsey Certonio - Special to the Daily Herald | Apr 20, 2024

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Credit cards have many benefits and have become increasingly popular over the years. However, there are drawbacks.

About 191 million Americans have at least one credit card account. Credit cards have become increasingly popular over the years, and rightfully so due to their many benefits. However, there are a few drawbacks, especially when it comes to protection.

While there is some protection that comes along with a credit card, such as the Fair Credit Billing Act that requires lenders to give borrowers 60 days to challenge a charge, some argue that there should be stricter regulations and laws put in place for customer protection.

Advancing regulations around predatory lending practices, late fees, increasing interest rates, credit score reporting and required financial literacy courses could help consumers better manage their credit card usage.

Predatory lending practices

Predatory lending is a serious offense, and there are laws in place to ward against it. In fact, lawmakers recognized a problem back in 2008 during the Great Recession. The Dodd-Frank Act of 2010 created the Consumer Financial Protection Bureau (CFPB) to reform financial institutions. This independent party watches lenders closely and responds when they notice unfair practices.

While the act was a step in the right direction, many lenders have found ways around the law that some consider predatory lending tactics. Watch out for a lender using loan churning, loan flipping and even bait-and-switch tactics to trick customers. Furthering the CFPB act to include more regulations would be another step toward protecting borrowers.

Late fees

The CFPB is forging ahead when it comes to late fees. On March 5, it announced that late fees will be cut down to $8 per incident, a huge difference from the previous average of $32 for a late payment.

The next stage of furthering a better late-fee policy would be to extend the grace period. Credit card companies usually give anywhere from 21 to 25 days to make a payment before they start tacking on late fees.

Increased interest rates

Did you know that credit lenders are not required to keep the same initial interest rate that was agreed upon? However, they do have to honor the agreement for the first year and give the borrower a 45-day notice before increasing it.

The laws against increasing interest rates are extremely lenient and make it difficult for borrowers to stay up on their payments. Tightening up the laws so lenders can only increase the initial interest rate by a said amount would aid in making customers feel more protected.

Credit score reporting

Credit scores can affect someone’s life in numerous ways, such as determining if one will qualify for a house or a new car. That is why it is vital that credit card companies report correct information to credit bureaus in a timely manner. At the moment, the Fair Credit Reporting Act regulates reporting to verify all information. Making this law more customer-friendly would mean calling for a short turnaround time for reporting as credit companies are only required to report every 30 to 45 days.

Financial literacy courses

Many times, the reason why people struggle to pay back their loans is they don’t fully understand the concept of a credit card before making purchases. Requiring borrowers to take a financial literacy course before being approved for a credit card would greatly enhance their knowledge so they can make more informed decisions for their financial well-being. These courses could be done through the institution itself or a third-party agency to ensure debt awareness.

Protecting credit card users would depend on new laws being put in place requiring credit lenders to change in areas such as predatory lending practices, late fees, increasing interest rates, reporting to credit bureaus and requiring borrowers to take financial literacy courses.

Lindsey Certonio is a project manager at Fullcast, a Silicon Slopes-based, end-to-end RevOps platform that allows companies to design, manage and track the performance of their revenue-generating teams.


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