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New credit card regulations are not enough

by Archives October 6, 2009

The federal government passed a bill Wednesday introducing new credit card regulations. Credit card companies will now be forced to provide basic account and rate information on credit card statements, allow a mandatory 21-day grace period before interest is charged, and notify customers before raising their credit limit. Other regulations include a provision that forces credit card companies to inform consumers how long it would take to pay off their balance by making the minimum payment each month. The new regulations will go into effect in two stages, in January and September 2010.
The bill has come under fire from opposition parties and some consumer advocacy groups, who argue the regulations do not go far enough. The Canadian Community Reinvestment Coalition in May called the proposed regulations “too little, too late,” and the NDP called for tighter controls on credit card interest hikes.
Auob Muntasar, VP External for the Concordia Student Union, gave mixed a reaction to the bill. “I think the new measures do reflect that the government is paying attention. These regulations are long due,” he said. “But the fact that the government hasn’t taken any action in capping interest rates is ridiculous.”
Dan Otchere, an economics professor at Concordia who specializes in credit cards, said capping interest rates would be a bad idea. “If credit card companies were to lower the interest rates, people would abuse it,” he said. “Because people have difficulty paying all their balance, they go onto the instalment plan. And that is the danger for every credit card user, once you do that the debt mounts, without you knowing it.”
Banks, the main issuer of credit cards in Canada, have also criticized the bill because they say it will cost millions of dollars and be difficult to implement. Chisholm Pothier, a spokesperson for the Minister of Finance, denied this, saying that banks were properly consulted and have been given ample time to prepare.
“There was a consultation period. They participated in that, and we took their input on it. Obviously we think this is doable or we wouldn’t be doing it.”

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