Wednesday, August 19, 2009
US: Consumers to benefit as credit card law debuts
By Juan Lagorio
NEW YORK (Reuters) - U.S. consumers will see on Thursday the first signs of the biggest overhaul of the credit card industry in at least two decades, as companies will be forced to provide customers with more time to pay their bills and be required to give more warning of contractual changes.
From August 20, credit card issuers will have to give clients at least 21 calendar days to pay monthly bills and will have to warn consumers 45 days in advance of major changes in conditions, under provisions of a law signed in May by President Barack Obama.
Now, credit card issuers have to mail bills at least 14 days in advance and provide a 15-day notice of changes in terms.
Consumers will also be able to reject the changes set by credit cards, and arrange a plan to cancel the debt and close the credit card account.
"It evens the amount of power between consumers and credit card companies, but it doesn't prevent credit card companies from charging really significant interest rates if they can find a reason to do it," said Jamie Court, president of consumer advocate group Consumer Watchdog.
Some of the biggest changes to the credit card industry look to limit the ability of companies to impose fees, raise interest rates or sell credit card to students, but those will not go into effect until February.
"Those are the ones the card issuers are trying to grapple with to see how to keep the business profitable," said Jason Arnold, an analyst at RBC Capital Markets.
Credit card firms enjoyed hefty profits earlier in the decade, as cheap money ignited a lending boom. American Express Co, usually considered a credit card company for wealthy consumers, became the fastest-growing firm by expanding among less affluent clients.
Other companies grew aggressively by offering no fees and adjusting interest rates according to customers' performance.
However, the housing slump and the financial crisis sent default rates to record highs in the last year. Since then, credit card companies have been closing accounts and trimming credit lines to cushion losses.
Public anger against credit card companies grew as the same banks that were penalizing customers for late payments started receiving billions of dollars of taxpayer money in federal bailouts.
"If Uncle Sam is giving free money to banks who have already received at least tens of billions of dollars from the federal government as bailouts, then the American taxpayers should know that there is a national cap on how much they can be charged," Court said.
"It is definitely a step in the right direction, but only because we were so far gone in the other direction."
The companies have anticipated that the restrictions of the new law will force them to slash credit lines and raise interest rates, or set annual fees.
Moshe Orenbuch, an analyst at Credit Suisse, estimated available credit lines could be cut by about 20 percent, or $1.2 trillion, as banks adjust to comply with the new credit card law.
American Express, Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc, Capital One Financial Corp, and Discover Financial Services make up around 80 percent of the credit card industry.
(Reporting by Juan Lagorio, editing by Gerald E. McCormick)
NEW YORK (Reuters) - U.S. consumers will see on Thursday the first signs of the biggest overhaul of the credit card industry in at least two decades, as companies will be forced to provide customers with more time to pay their bills and be required to give more warning of contractual changes.
From August 20, credit card issuers will have to give clients at least 21 calendar days to pay monthly bills and will have to warn consumers 45 days in advance of major changes in conditions, under provisions of a law signed in May by President Barack Obama.
Now, credit card issuers have to mail bills at least 14 days in advance and provide a 15-day notice of changes in terms.
Consumers will also be able to reject the changes set by credit cards, and arrange a plan to cancel the debt and close the credit card account.
"It evens the amount of power between consumers and credit card companies, but it doesn't prevent credit card companies from charging really significant interest rates if they can find a reason to do it," said Jamie Court, president of consumer advocate group Consumer Watchdog.
Some of the biggest changes to the credit card industry look to limit the ability of companies to impose fees, raise interest rates or sell credit card to students, but those will not go into effect until February.
"Those are the ones the card issuers are trying to grapple with to see how to keep the business profitable," said Jason Arnold, an analyst at RBC Capital Markets.
Credit card firms enjoyed hefty profits earlier in the decade, as cheap money ignited a lending boom. American Express Co, usually considered a credit card company for wealthy consumers, became the fastest-growing firm by expanding among less affluent clients.
Other companies grew aggressively by offering no fees and adjusting interest rates according to customers' performance.
However, the housing slump and the financial crisis sent default rates to record highs in the last year. Since then, credit card companies have been closing accounts and trimming credit lines to cushion losses.
Public anger against credit card companies grew as the same banks that were penalizing customers for late payments started receiving billions of dollars of taxpayer money in federal bailouts.
"If Uncle Sam is giving free money to banks who have already received at least tens of billions of dollars from the federal government as bailouts, then the American taxpayers should know that there is a national cap on how much they can be charged," Court said.
"It is definitely a step in the right direction, but only because we were so far gone in the other direction."
The companies have anticipated that the restrictions of the new law will force them to slash credit lines and raise interest rates, or set annual fees.
Moshe Orenbuch, an analyst at Credit Suisse, estimated available credit lines could be cut by about 20 percent, or $1.2 trillion, as banks adjust to comply with the new credit card law.
American Express, Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc, Capital One Financial Corp, and Discover Financial Services make up around 80 percent of the credit card industry.
(Reporting by Juan Lagorio, editing by Gerald E. McCormick)
Witness - Migrant Dreams
View these videos. It is sad to see the hardship and debts faced by the migrant workers:
http://www.youtube.com/watch?v=J9jdPDgo9bI
http://www.youtube.com/watch?v=6glRTS6QbQk
http://www.youtube.com/watch?v=J9jdPDgo9bI
http://www.youtube.com/watch?v=6glRTS6QbQk
Survey Results - National Service (3)
Here are the survey results, based on 150 replies. The results are similar to the interim report based on 100 replies.
Less than 10% of respondents (male citizens who have completed national service) are happy with the current arrangement. 54% said that they should be paid an adequate, regular salary. 37% prefer other ways to protect the nation (e.g. full time soldiers).
In the event of a war, 57% would not fight and give their life for Singapore. Some of their reasons are stated in the report. This is a worrisome finding and indicate that the morale problem needs to be arrested urgently..
There is a strong view (80%) that permanent residents should have the same NS obligations as citizens. 65% felt that females should also perform NS, but most prefer a non-combat role.
Less than 10% of respondents (male citizens who have completed national service) are happy with the current arrangement. 54% said that they should be paid an adequate, regular salary. 37% prefer other ways to protect the nation (e.g. full time soldiers).
In the event of a war, 57% would not fight and give their life for Singapore. Some of their reasons are stated in the report. This is a worrisome finding and indicate that the morale problem needs to be arrested urgently..
There is a strong view (80%) that permanent residents should have the same NS obligations as citizens. 65% felt that females should also perform NS, but most prefer a non-combat role.
Frenzy in private property market
There is a frenzy in the private property market. People are rushing for the new launches at record prices.
I plan to introduce a website that gives information to the consumers about the prices of private property and condominiums. Buyers can search the website to see what is being transacted for similar properties around the same area. They can also see the amenities and other useful information.
Consumers should carry out their research and understand the market, before committing to a purchase of $1 million or more, that will tie them down over a lifetime.
I plan to introduce a website that gives information to the consumers about the prices of private property and condominiums. Buyers can search the website to see what is being transacted for similar properties around the same area. They can also see the amenities and other useful information.
The website is not ready yet, but you can get a feel about the information that is available by looking at the development version in www.easysearch.sg (Real Estate Data). It will be ready by end August (with past transactions and amenity data).
Consumers should carry out their research and understand the market, before committing to a purchase of $1 million or more, that will tie them down over a lifetime.
Tan Kin Lian
E-mail to Signatories of the Petition
I have sent an e-mail to more than 700 people who signed the Petition to ask them to attend the Gathering at 5 pm at Hong Lim Park on Saturday 22 August. Tentatively, I have asked a former relationship manager to speak at the Gathering, but this is not confirmed yet. I look forward to a large turnout.
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