by Joseph Kenny | 02/3/09

A recently proposed reform for credit card practices would have a huge advantage for all the consumers who are taken advantage of with outrageous credit card contracts.

Many terrible practices such as charging a consumer interest on an amount already paid and having free reign to raise the interest rate of a loan due to late payments, are but a few of the ridiculous things that people sign on to put up with when they get a credit card.

Often, when companies market a credit card to consumers, it is done in a deceptive way, making people think it is to their advantage to get items now and pay later for a seemingly small fee. However, when you make the first late payment, you may find yourself in way over your head. The practices currently in place to deceive and take advantage of consumers may soon be a thing of the past, however, if the reform being proposed is put into practice.

The Federal Trade Commissions Act and the Truth in Lending Act are the acts involved in the proposed changes to credit lending practices. The proposed changes to these acts could limit the circumstances under which a bank can raise interest rates on a consumer.

Another practice that will not be tolerated under the amended acts is the act of applying the funds of a payment to the loan with the lowest interest rates. If a consumer had two credit cards with a bank and they have different interest rates the creditor will apply the money they pay on the loan that exceeds the minimum to the loan with the lower interest rate, causing the higher one to skyrocket to a balance they can sometimes never pay off. This has contributed to an extraordinarily high nationwide debt level, and if lawmakers have their way, it will stop.

Another very welcomed change to credit lending practices would be to give people a more reasonable amount of time to make the payments on a loan. Studies have shown that oftentimes, if borrowers had been given only a few more weeks or months, they would never have gotten behind in their payments at all and be debt free right now.

Ultimately, if these changes are put into place and people become more aware of the contracts they are signing, then the days of consumers being taken advantage of by lenders may soon be behind us.