Credit card trouble

The Baltimore Sun

Federal regulators have finally adopted new rules for the credit card industry - policies designed to keep people from getting hammered by soaring interest-rate increases on existing accounts.

But the rules don't go into effect until July 2010, and that's much too long to wait. The new Congress and the Obama administration should find a way to expedite the changes, giving banks and other lending companies some time to comply - but not a year and a half. That's especially true since there are legitimate concerns that credit card companies and banks may impose higher rates and fees on many customers to make up for their losses in the sluggish mortgage market.

Millions of people are having trouble keeping up with their mortgages, and credit card debt is part of the problem for a substantial number of beleaguered homeowners. Young people in college or just out of school also tend to rack up a lot of credit card debt. Interest on this debt, which can reach 20 percent in some cases, can make it virtually impossible for people to dig out of financial messes.

Americans should be more careful in how they manage their credit card debt. But the card companies often prey on cardholders, confusing them with hard-to-understand terms of service and with "bait and switch" techniques that land them in financial trouble. The new rules will allow companies to raise interest rates only on new credit cards and future purchases or advances, rather than on current balances. And they will force companies to give longer notifications for certain changes made to the terms of an account, such as tagging on higher penalties for delayed or missing payments.

Considering the billions of dollars they are receiving from the federal government during this economic crisis, banks and other financial institutions should be doing their part to bring more stability to credit card interest rates and more clarity to the terms of service.

Giving people a fighting chance to get out of credit card debt through more stable interest rates and other remedies must be part of the economic recovery - now, not later.

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