The full extent of the new credit card legislation will not kick in until February 22. And since its announcement, many of us have been experiencing the credit card companies' efforts to remedy the government action.
For example, card companies are quickly pushing interest rates, doubling minimum payments, sneaking in fees and lowering credit limits, even for cardholders with solid credit histories.
Back in August, the first wave of reform took effect, requiring card issuers to provide additional notice of account changes, such as rate changes or fee hikes. In February, the second wave will impart on card companies the responsibility to limit interest rate increases on current balances. Next summer will see the final phases of the law involving reduced fees.
Truthfully, if you have thought about bankruptcy recently but are holding out hope that these new laws are going to fix your credit card debt problems, we have news for you: you need to call us. And quickly. Your bills are only going to continue to mount and could even get worse. Because the folks on the other side of your Visa, MasterCard and Discover statements still have ways to encourage you to spend and at the very least, know how to continue to make additional money off of your monthly balances.
While the new legislation will prevent credit card companies from jacking your interest rates on an existing balance, they will still be able to raise your rate after a late payment or other form of "agreement violation." And, they can raise those rates by any amount they deem reasonable. Rest assured, their definition of "reasonable" is not the same as ours.
One of the loopholes in the new legislation (called the CARD act) is that it only addresses existing fees and rules. Card companies can create new fees at will. A representative with www.lowcards.com, a Web site devoted to helping consumers understand credit cards, recently stated, "Theoretically, they could create a fee for names that begin with 'J."
Annual fees, online access fees, inactivity charges---you name it, could become familiar numbers at the bottom of your monthly statement. Fifth Third Bank starting using a $19.00 inactivity fee if a card is not used for 12 months and Citibank is implementing fees for some customers who don't spend more than $2,400 a year.
Credit card issuers will also be doubling minimum balance payments and in some cases, by even more. For a person carrying a $5,000 balance, that payment, typically at 2 percent, could be as much as $250, which amounts to 5 percent of their balance. For many, this could be the scariest component of a card company's profit strategy, as most cardholders use the minimum payment as a benchmark for staying afloat.
Thankfully, Washington has recognized the practices underway in the credit card industry and proposed, under House Financial Services Committee Chair Barney Frank (who else?), the Consumer Financial Protection Agency. The purpose, among many others to be sure, of this regulatory entity would be to approve credit card fees.
Credit card companies might want to exercise caution as they proceed, however. This is the age of the vocal consumer. Viral ground swells of protest can flow quickly via the Internet, especially through social media pathways. A woman recently posted her disgust with Bank of America's actions relative to a interest rate hike on YouTube. It resulted in her rate being reduced to its original amount.
Does that give you any ideas?