New Credit Card Regulations

Victory: new rules Kill Credit Card Industry’s Most Abusive Practices

• No more raising rates on existing balances
• No more double-cycle billing.
• Any payment above the minimum must automatically apply to the part of the balance with the highest interest.

Credit Crunch: AMEX Cuts You Off Unless You Show Them Your Tax Returns.

This after I’ve never missed a payment or been late in any way across any credit line. I called back again, got someone in the US finally, explained what was going on, and that I was stuck in Los Angeles on vacation, and that I don’t carry another card. I carry my AMEX because it’s the card I use for everything. I told them that I was 3000 miles from home, and that I couldn’t even go out and have a good time while I was here. I asked why American Express didn’t inform me of this, didn’t send an email, or a letter asking me to provide financial documentation. No answer, no explanation.

They didn’t seem to care.

My Take

First, these regulations are going to reinforce the current trend of shutting down credit lines and raising rates on weaker borrowers. It will be herald as tough regulation as the people most at risk from these practices are having their credit cards shutdown and rejected from new lines of credit.

The honest situation is that without these money making tactics it doesn’t make sense to give credit cards to most people. There is too much risk to give someone making 40k a year a 10k line of credit if you can’t adjust the rate on balances based on credit quality. Expect the next round of complaining to be “VISA shut down my card even though I was no where near the limit!”

These regulations are also going to lead to extensive changes in the structure of revolving debt securitization.

Second, I’ve heard sob stories like the one above before. American Express is notorious for locking down its Charge Card accounts based on odd spending habits with little warning. This person complains that they want to see his tax information even though he hasn’t missed a payment on any line of credit and always pays his balance in full each month. He also admits that he is running much larger charges all of a sudden and another person is paying a portion of his bill (indirectly). Then he complains that he is screwed on vacation because they shut down his line of credit and he is stuck with no money.

Things just dont add up to me. If you’re charging the amount claimed (roughly 90k spend) then why doesn’t he use some of the cash that he has to have laying around to spend on your vacation. American Express is not accepted everywhere (far from it), so surely he has another credit card (VISA) that could be usedwhile things get solved.

Finally, the Amex Platinum is a charge, not credit, card so income and assets play a huge role in purchasing power extended. Amex watches your credit statements like a hawk and will aggressivly protect themselves. Why would you be surprised that they would flag your account when there are no signs that your income has increased and yet you suddenly start charging 50% more a month on the card?

I suspect there is more to this story than what has been published. There always is.