Financial planners, credit counselors, debt managers and consumer advocates have high hopes that President-elect Barack Obama will make credit card reform a priority when he takes office. Experts say that with the new administration may come a new era of consumer protection from shady lending and credit card industry practices.
According to CreditCards.com, during his campaigning, Obama promised that his administration would make efforts to make sure that credit card and mortgage loan terms are clear so that consumers are not deceived. He also vowed to try to rein in interest rate charges and fees.
However, the new president will have a lot on his plate after Inauguration Day. On his priority list will also be the sinking economy, foreclosure crisis and mass layoffs. He will also have to address tax issues, Social Security and health care. Some feel that credit card reform may be towards the end of Obama's long to-do list.
David Jones, president of the Association of Independent Consumer Credit Counseling Agencies, a nationwide group of nonprofit credit counseling agencies, is confident that there will be changes in the credit industry. Jones says that the time is right for a credit card bill of rights.
Jones also says that more regulation and oversight of credit card and banking practices is eminent and unavoidable.
Many Americans live on the brink of bankruptcy, saddled with unmanageable credit card debt. Yet these same people are still using their credit cards because they now have to in order to cover living expenses.
Credit - and a lot of it - was once freely available to virtually everyone. As a result, many Americans overspent and now owe debts that they cannot possibly pay. In the meantime, interest continues to accrue on these debts and late payments bring even higher interest rates in addition to late fees.
Then the economy began to implode and mass layoffs, credit crunch and foreclosure crisis became buzzwords. These factors have pushed many Americans into filing bankruptcy.
During his presidential campaign, Obama laid out a pro-consumer credit card reform plan.
First, he said that a five-star or similar rating system for credit cards should be created. The rating system would assess the card's features and the issuers would be required to display the rating on all credit card applications and solicitation materials.
Obama also wants to establish a credit card bill of rights that would ban universal default, prohibit unilateral changes to contracts and also prohibit credit card issuers from charging interest on fees.
Another facet of Obama's credit card reform plan involves the revision of bankruptcy laws to allow families with large medical bills to have their medical debts forgiven. He also would like to allow homeowners who are filing bankruptcy to adjust the terms of their mortgage loans so that they can keep their homes.
For payday loans, Obama would like to cap the interest rates at 36 percent and require these short term lenders to provide consumers with a clear disclosure of loan terms.
Obama was quick to point out that he will have many issues to deal with as president, and credit card reform would not come overnight. However, if his campaign promises are kept, it will be addressed with Obama's pro-consumer goals in mind.