Consumers Need To Know These 3 Things To Manage Credit Debt

After serving as Chair of the House Financial Services Committee during the Great Recession, from 2007 to 2011, I became convinced of the importance of increased financial education and I am delighted that CNBC has launched Invest in You: Ready. Together. Grow. to educate Americans in the areas of saving, spending and investing.

Although we have made significant progress in reducing the volume of careless loans to households over the last 10 years, the financial pressures that people face have not eased and the incentive to borrow more than what is manageable remains strong.

We have effectively regulated the ban on the worst loans, especially mortgages. But other protective measures only work fully if consumers benefit. It means reading the fine print of every financial agreement you sign and understanding what the terms of the contract really mean.

Credit card contracts that set company-defined interest rates, for example, can cost you a lot if you give up reading them. But with all the legal jargon contained in these agreements, understanding them is easier said than done. In order to familiarize yourself with many conditions and to compare the conditions of one credit card issuer to another, the Consumer Financial Protection Bureau provides a database of credit card contracts on its website.

Here are three protective measures put in place that all consumers should know.

Clarify the fine print. The print is not as beautiful as before – nor so confusing. Indeed, there are now legislative and administrative mandates that require consumer choices to be more clearly defined than in the past. If you still find the language too obscure, contact the Office of Consumer Financial Protection, which has a mandate to enforce the rule of clarity.

Announcement of rate increases proposed well in advance. Because the respect of market forces remains strong, apart from the absolute prohibition of predatory lending abusive, our regulation does not prohibit high borrowing costs for consumers, but instead requires that the Institution offering services clearly states these conditions. For example, credit card providers now have to announce proposed rate increases well before they are implemented, so that consumers have the option of switching to a cheaper card. The possibility that people are changing rather than staying with a card with a higher rate has a competitive effect on moderating increases.

Offer the choice of unsubscription. Finally, although my preference was to institute what we call "registration" procedures for changes in conditions offered by financial institutions, the banks had enough political power to demand that they be "opt-in". out ". (Their power was not uncontrolled, they would have preferred no option.)

Unsubscription means that your lender can apply the planned increases without your explicit approval, unless you choose to opt out. The membership option, on the other hand, protects you from any changes unless you agree to it explicitly.

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Recently, I personally realized how important it was to read the fine print, not only about the initial credit card contracts, but also about the documents. Credit card providers send you periodically by mail a change of conditions.

JPMorgan Chase has sent me a long document on a change that they planned to implement in the near future that would alter the terms of their original agreement. This included a notice that unless I sent them a signed letter next month expressly denying the change, I would lose the right to sue them if they violated my rights and I had to submit any dispute to the 39; arbitration. I immediately sent them the letter of refusal – or refusal.

For many reasons, arbitration strongly favors the institution in cases where an individual consumer challenges the action of a megabank or other financial companies. Companies often use referees, which allows them both to become more familiar with the process and to have an influence that is not always subtle, in order to avoid being too pro-consumer.

Compulsory arbitration also prevents borrowers from uniting to end abusive practices, such as those in Wells Fargo, in which hundreds of thousands of customers or more are deprived of sums too small to justify fees of a single procedure, but can be stopped if they can pleaded.

Indeed, the tendency to substitute compulsory arbitration for judicial action as a means of combating the derivation of individual rights is a major threat to laws protecting against fraud, discrimination and other abuse.

So, read carefully not just before borrowing, but at any time you receive information throughout a relationship. And to borrow from another institution, you will often be better served if you simply say no.

– By Barney Frank, CNBC contributor, former US representative of Mbadachusetts and chair of the US House Committee on Financial Services. During his first two years as President, Frank worked closely with senior Bush administration officials to deal with the financial crisis. In 2009 and 2010, he was one of the leading authors, along with Senator Chris Dodd, of the detailed financial reform bill.

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