Last year, there was a big government crackdown on credit card companies in Canada. These rules followed a host of similar rules in the US. It created a new era of more legislation around borrowing in North America, and a real sense that consumers just aren’t doing enough to protect themselves, so governments are stepping in.
Here’s a review. You can read about it here. But basically, in early 2010, the Canadian government handed out a list of new rules to take effect in September of last year.
Companies must give buyers a 21-day grace period for new purchases, for which they will not be charged interest. Caveat: the consumer must not be carrying a balance on their card to qualify.
Statements now have to not only state the minimum payment due, but tell credit card owners just how long it would take to pay off their balance if they only made that minimum payment.
Another rule stated that companies were no longer allowed to raise your borrowing limit; they needed your written consent to do so now.
Add these to the new federal budget, finally passed in June, that bans unsolicited credit card cheques and puts more harsh rules on prepaid credit cards.
So what impact are these rules having? Big picture wise, they’re not changing our consumer debt levels. In early 2011, numbers released by various groups showed our levels of consumer debt are higher than ever. For instance, credit bureau TransUnion estimated that the average Canadian owed $25,709, excluding mortgage debt, in the final quarter of 2010, up 5.6% from a year before.
Sure, it’s too early for these numbers to really measure if these new rules are having an impact.
My sense: the change is there, but it’s very small. Some people with credit card debt are going to mull over their statements, plotting and planning. They’ll be seeing that helpful calculation number and perhaps increasing their payments as a result. If you flip over your paper bill too, you’ll see more fine print related to interest and minimum payments, which is helpful information.
But many of us who owe like to keep ourselves in denial. If you barely read your credit card statements, or even toss them in the garbage without opening that painful envelope, it doesn’t matter what’s written on that piece of paper.
Meanwhile, for many of us who get our bills electronically, opening up a pdf or scrolling between pages on a bill site just doesn’t happen that often, I find.
It’s great that these companies can’t just raise limits willy nilly, and that the brand new rules are pushing credit card cheques to the side.
More importantly, these small changes are probably going to lead to more. Whether you agree with excessive government rules or not, in the case where these rules protect the most vulnerable of us against unfair lending practices, they are bound to have some good longer term benefits for all of us.
Writer for RateSupermarket.ca