War of the Worlds: Creditors Vs. Borrowers

By ccflyers on April 18, 2008

Credit issuers and credit consumers are supposed to make win-win deals and live in peace and harmony. However, lenders and borrowers’ confrontation seem to never stop. And their coexistence can be called love-hate relationship.

Both fight for their rights and want to get maximum profit from deals. But in this eternal battle credit card issuers manage to gain the upper hand more often than credit card holders. But borrowers cry for justice and their appeals are not overlooked by the government.

Credit card owners are complaining that they cannot feel confident about tomorrow. They have to rely on the Divine Providence of credit card industry’s changes. So, the government has made a decision to make credit card companies give up some of their controversial practices. The three main issues under review are: too-short card holders notice of changes in terms and conditions of their card offers, universal default, unreasonable changes in interest rates.

Lenders claim that they are also going through hard times after all those credit card defaults, delinquencies, mortgage crisis. But consumers and their advocates, supported by financial analysts’ opinion, declare that credit companies earn billions of dollars and can treat their clients better.

Universal default is when a credit card company raises customer’s interest rates due to lowering of his or her credit score. This seems to be a reasonable penalty for credit score damage. But the problem is that the rules and regulations of this practice are vague and ambiguous. For instance, you are late with your car loan payment and your credit card interest rate can be increased. Your interest rate goes up, your credit card payments grow larger, and your chances to default on several (not just one) creditors also increase. Even your low interest credit card won’t save you.

As for notices, currently credit card issuers are obliged to send a two-week notice by mail before they change customer’s credit card terms and conditions. This time period is dramatically short. By the time a card holder receives the notice (if they do receive them), they have just a few days before the day new terms are applied. And, as you guess, 2-3 days are not enough to figure out how to deal with those new requirements.

If credit consumers mange to assert their rights and the bill is passed, the notice period will be extended to almost a month. Credit companies will be required as well to send card holders their credit card monthly bills 25 days before the due date. This is supposed to change the currently existing two-week billing cycle.

The penalty interest rates that some credit card companies apply now to the overall balance on a customer’s credit card are questioned as well. Say you’ve been accurately paying off your debt for months or even years and after you are just a couple days late just once, you get accrued punitive interest rates to the debt as well. Credit card issuers are being required to attach the penalty rate to only that part of the balance which caused the rise.

The bill was proposed about a month ago by the House Financial Services Committee. There is no guarantee that it will pass, but if you remember like it goes in that Beastie Boys’ song, “You gotta fight for your right…” to claim a better and fair attitude from your lender.

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One Response to “War of the Worlds: Creditors Vs. Borrowers”

  1. Albert said:

    I this game creditors will always win.

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