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Consumers Find Themselves in a Tight Spot Under the New Law

By Sally Maison
Published: Sunday, September 6th, 2009

The new credit act was designed by congress to protect consumers from usurious practices by credit companies. It has been only roughly couple of weeks after President Barack Obama signed it into a federal law. However, consumers are already feeling the weight of the laws’ consequences on their back.

MOBURF-00003068-001Financial companies such as Chase Card Services have been raising minimum monthly payments and cutting off limits sharply. Finance specialists say that timely payments and outstanding balance managements are not likely to keep creditors from changing the policy of consumers. Creditors simply ignore good ratings or scores, but are being more cautious with people who have bad ones.
Even if card holders complain non-stop, it is almost impossible that card companies will listen to them. Gerri Detweiler, a credit advisor for Credit.com and an author on personal finance, summarizes the attitude of creditors: “Card issuers just don’t care right now.” Many consumers have written to credit companies and even to their presidents, but their petitions were merely ignored.

Finance specialists comment that creditors are still anticipating the worst effects of the economic crunch and the new credit laws on them. Right now, their primary focus is preserving their profit and guarding themselves against losses which they think they will incur with the new credit law. Experts add that the last thing credit companies have in mind is losing profit by sticking to their previous interest rates and credit limits.

As of now, consumers are caught at a dead end. Greg McBride, the senior financial analyst of Bankrate.com, says: “You may not use the card very often or you may do everything right, but a seldom-used account or an account where there is a lot of available credit — even when everything is paid on time — represents a risk exposure to a card issuer, not an opportunity to boost their receivables. If you are not an opportunity, you’re their risk…”

With the interest rates rising and their credit scores dropping, many consumers feel that they cannot do anything to make their financial situation better. However, credit specialists say that consumers can still bounce back by paying off their debts and avoid acquiring new ones while doing so. If they cannot be debt-free in the near future, consumers are still encouraged to pay their bills on time. Chuck Jaffe of MarketWatch says that consumers can play on their own terms with card companies once their sheets are clean. For now, consumers should just focus on improving their credit scores or financial ratings.

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