Liberal Lens with Stephanie England
Liberal Lens with Stephanie England

For too long, our country has placed an emphasis on the “American Dream,” which we have defined as living a prosperous life — whether achieved by hard work or by credit. We’ve placed an emphasis on material possessions and on outward appearances of wealth instead of living within our means as individuals and families. This fault on behalf of Americans revealed itself most cruelly in the sub-prime mortgage collapse, as Americans bought homes they simply could not afford and had to foreclose.

However, the Senate has recognized an additional issue related to American finances that they addressed in the recent credit bill.

MSNBC reported that Sen. Richard Shelby (R-AL) said of the credit card bill, “Card issuers raise rates for unclear reasons, use billing methods that consumers do not understand, and assign fees and charges without warning.”

In a statement upon passing the bill, Sen. Harry Reid (D-NV) mentioned Shelley Lyons, a woman who contacted him regarding the importance of this bill and the unfairness of credit card company practices.

“Like many honest and hardworking Americans, Shelley played by the rules,” he said. “She was responsible. Then, one day, out of the blue, her credit card company nearly doubled her rate. Shelley understandably wanted out of her contract. But the company said no.”

The Senate credit card bill had overwhelming bipartisan support, and passed 90-5 on Tuesday.

The reason this bill passed with such support could be a direct result of the involvement of the American public in the political process. MSNBC also reported that although there were dissenting voices in the Senate, “their voices were drowned out by lawmakers who said their offices had received dozens of complaints from voters.”

The bill changes the way that credit card companies and collections agencies will operate. Under the new bill, the company may raise a credit card holder’s rate only after the holder is late 60 days. However,according to  The New York Times, upon making a minimum payment on time for six months, the credit card company must return the rate to its previous level.

The bill also restricts who may be approved for a credit card. Those under 21 must prove that they can make the minimum payment or cite a parent or guardian as guarantor before being approved for a credit card.

Some critics of this bill might claim that it only perpetuates Americans’ careless spending habits. I argue that it highlights the consequences of not paying one’s debts on time and encourages prompt payments.

Under the Senate version of this bill, the rate hike can be implemented on customers who are more than two months late, and after 45 days’ notice of a rate increase. Card holders are more likely to attempt to pay bills before the 60 day deadline approaches in order to save themselves from the rate increase.

The bill also makes it easier for customers to make payments. According to an Associated Press report, “Lenders would have to post their credit card agreements on the Internet and let customers pay their bills online or by phone without an added fee.”

The AP also reports that some bankers criticize the bill because it is already a risky business to lend people money “with no collateral and little more than a promise to pay it back.”

Edward Yingling, president and CEO of the American Bankers Association, told the AP, “It is a fundamental rule of lending that an increase in risk means that less credit will be available and that the credit that is available will often have a higher interest rate.”

I do not think that this is necessarily a negative consequence to the average customer, because the credit bill protects against illegitimate and unfounded hikes in interest. On a sociological level, decreasing the availability of credit cards might be a positive element to curb Americans’ reliance on credit spending.

If Yingling is correct and the bill causes credit card companies to be more careful about offering credit as freely as they currently do, we Americans might be forced to reevaluate our needs and wants, and to prioritize our spending in ways that we haven’t been forced to in the past. Most importantly, this bill is a positive step toward being satisfied with what we as Americans have and reevaluating the definition of the American Dream.

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