Just another in a long line of laws that are making things more expensive than they need to be. Just as America is trying to turn the corner and get back on our feet, the Feds have issued another decree that’s gonna make it harder to make it.
The Credit Card Accountability Responsibility and Disclosure Act that was passed in 2009 just keep giving:
CHICAGO (MarketWatch) — Consumers, particularly those who are consistently late in paying their credit-card bills, now can breathe a sigh of relief: The Federal Reserve said Tuesday it is limiting penalty fees to no more than $25 in most cases as well as banning so-called “inactivity” fees.
And that’s not all. The law further sets limits on even THAT $25 cap:
…the Fed also said it’s putting the squeeze on late fees that are higher than the consumer’s violation. For example, a consumer who was late paying a $20 minimum payment could be charged a $39 penalty fee. The Fed on Tuesday said penalty fees cannot exceed the dollar amount of the consumer’s violation.
These rules seem to sound like good ideas. Like they’re protecting the consumer. But all their doing is restricting the methods whereby the banks can even make money.
In the lending business it becomes very important to be able to identify the people who borrow money and then never pay it back. It’s these people who make it hard to turn a profit. So, in order to get back their money, the banks have done an analysis and have found that late fees are the preferred method to make this profit. By eliminating this practice, the banks are going to have to find another way; something like higher interest rates. Or higher annual fees.
Thanks for nothin’ guys.