May 26, 2009

Credit card law falls short, some say

The credit card reform bill, just signed into law in Washington, does not go far enough to curb lender abuses, industry observers said.

Among the changes, the new law requires companies to provide more notice before changing interest rates, and requires payments to apply to the highest interest rates on an account first. It prohibits cards being issued to minors without their parent's permission and stops a lender from accepting charges that exceed spending limits, The Los Angeles Times reported.

But, the laws do not cap interest rates or fees and does nothing to stop a company from reducing a spending limit or closing accounts. It also fails to address behavioral profiling, which includes practices such as setting a spending limit based on someone using a card in a poor neighborhood.

In addition, companies should rely on postmarks to ensure payments are made within the 21-day limit set by the new law, said Robert Manning, a consumer finance specialist at the Rochester Institute of Technology.

This legislation deals with today's problems, not tomorrow's, and it doesn't set up a framework for dealing with tomorrow's problems, said Adam Levitin, an associate professor at the Georgetown University Law Center.