This summer New York legislature passed a straightforward piece of legislation to help consumers: credit card companies would be banned from using universal default clauses. This would have put New York in the forefront at striking back at one of the credit industry’s most profitable tactics charging more whenever the company thinks you’ll have nowhere else to go.
Governor Pataki just vetoed the bill.
Looking for political cover, the governor claims the bill had technical problems. Consumer advocates said his argument was a sham. Let’s face it the governor didn’t work to get the bill and he didn’t say make these changes so that I can support it. In a choice between consumer interests and credit industry interests, the governor chose the industry.
Governor Pataki has given his stamp of approval to a deceptive practice that costs consumers millions of dollars in inflated interest payments. Let’s be clear here: the company raises the interest rate the amount the covers the time value of money plus the risk you wouldn’t pay on all the money already borrowed. No other creditor gets to do this. If someone loses her job or gets sick, the mortgage company can’t increase the rate, nor can the car financer. But credit card companies can raise the interest rate on money already borrowed even for customers who are meeting every single term in their current credit agreement.
Anyone who gets into a dispute over whether a cell phone payment was late and suddenly discovers that the interest rate on her credit card has been boosted to 29% can send a personal thank-you to the governor.
