TJP

Credit Card Gouging: Make the Banks Reciprocate

By Byron A. Ellis – July 17, 2009

The United States government allowed financial institutions to use taxpayers’ money to stave of bankruptcy. Now, unscrupulous bankers are rewarding themselves with million dollar bonuses and raising credit cards fees and interest rates ahead of federal legislation at taxpayers’ expense.

Taxpayers deserve protection from unscrupulous bankers. However, it appears that the Administration and Congress will continue to allow credit card gouging by financial institutions prior to the new credit card rules that will become effective in July 2010. Thus, making the rule basically ineffective, since banks are allowed, in the interim, to raise the rates on old credit card balances.

Accordingly, the rules would to allow credit card companies only to raise rates on new credit cards and on future purchases or advances, rather than on current balances. But, banks are raising the rates on current balances now, so how do the new rules protect the consumers?

Federal regulators should revisit the credit card rules and limit the ability of banks to raise rates on current balances ahead of the pending rules or change the effective date of the rules to the present. Financial institutions are not the only ones that need a bailout; taxpayers are also in need of a bailout.

At a time when consumption is low and consumers are struggling financially, the banks should not be allowed to gouge taxpayers. Furthermore, it is only consumer purchases that can stabilize the economy, since consumption is 60 percent of the gross domestic product.

Higher credit card interest rates and fees will inhibit consumer purchases and slow economic recovery. Taxpayers, Congress, and the Administration helped the banks to achieve financial stability. However, the banks have shown any signs of reciprocity.

It is time for the Administration to step in and make the banks more taxpayer friendly.

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