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Changes are coming credit cards President Obama set to sign the credit card holders bill of rights act into law I can try to say that efficiently today.
Affecting how card companies do business -- you for a look at the changes in store who'll be impacted Greg McBride senior financial analyst at Bankrate dot com.
And doctor Robert Manning -- the author of credit card nation the consequences of America's addiction.
Good morning gentlemen thanks for being here appreciate it great let me start with you.
Most importantly let's explain to people at home what precisely.
Is in the bill.
That will impact them as a consumer what are the changes.
But what it does -- is gets rid of some of his gotcha type practices that are flown under the radar for too long we're talking about the ability for card issuers to raise interest rates.
At any time for any reason in particular what's known as the universal default clause whereby you're late was another issue where.
Your credit card can raise your rate even if you've been on time with them.
It also does away with things such as double cycle billing.
-- charges for last minute payments that are made either by telephone or those last minute online.
-- -- Robert won't be through here what does this do you on the revenue side of the equation to the financial institutions and up and wanna bring up.
Who the biggest lenders are because I -- no coincidence a lot of them tend to be people who are some of the bigger TARP recipients.
-- disputed these guys.
We'll keep in mind Alexis of the top ten credit card issuers have received about a 160 billion dollars.
In TARP funding and we're we're talking about Citibank bank of American states that are the Big Three.
And really the key is here -- by not being able to go into the higher limits in terms a universal default.
It really is gonna hurt their ability to secure tries a lot of the debt particularly the worst that that they haven't been able to sell on the secondary market.
In terms of squeezing consumers however they are able to raise those interest rates now until the bill goes into effect in February.
OK so let's explain to people just for a second Robert.
The securitization market is essential to these -- interest in the same way that it's -- essential to the mortgage market it's it's it's basically given them the funding to go out there and we land it's been pretty locked up.
One of the things that the Federal Reserve is trying to.
Approach I guess -- the -- some other programs.
What does -- do it -- -- impacts the securitization market does it mean that you and I will have less access to credit well right now -- That's what the federal government is done by lowering the Federal Reserve fund rates almost zero so right now liquidity is not a crucial issue.
These banks have access to the federal guarantee liquidity fund which is essentially free insurance they're trying to unlock these markets to offset.
The loss of future revenues from these resets -- much higher credit card fees that the industry has been able to include in the packaging of the -- securitizations.
You know Greg a lot of people are talking about the negative unintended perhaps consequences of what this might -- to the people who actually pay on time or summer that.
Best creditors what are some the implications for how they need to look to make up the loss and revenue.
That could be generated as a result of the -- Well the biggest game changer is the fact that card issuers won't be able to change rates on an existing balance until the card -- sixty days delinquent so.
Because of that everybody including those that have been -- very good credit are going to have to get accustomed to lower credit limits higher interest rates and higher fees.
That we've seen in recent years because they won't be able to change that raid on that existing balance until the card -- seriously delinquent.
So I think that's you know that's the biggest thing -- as doctor Manning noted a moment ago.
This is the legislation won't take effect until late February to for the next nine months brace yourself you're going to see issuers continuing to raise those interest rates.
And do so while they -- before they lose the ability to do so.
Eat Eaton Bob what it was specifically part of this legislation was directed toward the college community toward -- -- getting an -- Regis manifold to patients.
How will this impact them and ultimately the parents.
All probably a foot and -- these credit cards right.
-- -- the the big issue here is that you can't market to students 121.
In less they can verify that they have an income to support the line of credit.
Or the parents have to co sign.
Of course the big issue here is that we're talking about a recessionary period of months we've seen a big spike in average debt levels among college students with their credit card debt.
And the unintended consequences as many parents are going to be relying on their kids to get credit cards that help.
Now back at home.
You know but you mentioned -- and nine months to go before it officially goes into a fact in the meantime.
I'm assuming that we need to ourselves be looking at -- statements a lot more aggressively to protect ourselves against.
Any of these fees and -- perhaps even get on the phone with these guys and say hey wait a second.
But it does it in power -- Yeah I absolutely pay very close attention not just of the statements that to any correspondence -- get from your -- -- were the things you wanna be on the lookout for.
Increases in your interest rate.
Reductions in your credit line that will continue and and the legislation does nothing to change that either.
And then also the implementation of these -- you starting to see higher fees for things like balance transfers and cash advances.
And that's going to continue as well.
I have noticed that indeed RA at -- thank you very much doctor rob Manning as well -- having.
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