How New Credit Card Rules Can Help You

In this era of extreme homeowner hardship, mounting medical bills, and surging unemployment, most people use their credit cards—for better or for worse—just to get by. But, as everyone knows, there’s a price to pay for playing with plastic, including, over recent years, soaring interest rates, diminishing card disclosures, and a general lack of lender and credit card company transparency.

Well, now a hint of positive consumer news is just on the horizon. In addition to a few provisions enacted in August 2009 signifying a new era of consumer protection law, as of February 22, 2010, even more sweeping changes are set to occur in an effort to right several of the most basic wrongs credit card companies have increasingly imposed upon card holders.

The all-new Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act), signed into law by President Obama on May 22, 2009, is poised to protect consumers from unexpected and massive changes to their credit card terms—terms that have previously led to financial hardship for an overwhelming amount of American families.

As of February 22, 2010, major changes include:

Death to the “Default Clause”
Credit card issuers will be unable to increase interest rates on existing credit card balances unless you, as borrower, are a minimum of 60 days late on your card account. This provision eliminates the universal “default clause” whereby card companies could simply your increase interest rates and fees based on defaults on other debts.

Clear and Present Disclosure &  Standard Promotional Periods
Credit card companies must provide clear disclosure of account terms before you open a credit card account. Additionally, if the account is pitched with a promotional interest rate period, that rate must last a minimum of six months.

Interest Rates Remain In Check
Issuers cannot raise interest rates on your new credit cards during the first year of your account, unless the you are 60 days late on a credit card payment.

Overcoming Over Limit Fees
Credit card issuers cannot charge over-limit fees without your prior consent to accept and process over-limit transactions. If your consent is obtained, the card issuer cannot then charge more than one over-limit fee per billing cycle. Also, the issuer may not charge an over-limit fee if interest charges or fees are the reason the account is over its limit.

Packing Up Those Penalties
Credit card issuers must not charge penalties for receipt of payments by mail, phone, electronic transfer, or any other method, unless the payment is processed through an expedited service processor.

Avoids Taking Advantage of Younger Borrowers
These new rules make it much more difficult for credit card companies to target and issue cards to borrowers under age 21 without a co-signer, unless it is shown that the borrower has sufficient income to repay the card amount.

Atone for the Holidays
If an account due date falls on a weekend or holiday, the credit card company is forbidden from penalizing payments that are received on the following business day. In addition, any account payments received by 5 PM must be credited to the same day.

Down with Double Billing
Some credit card companies have used the previous month’s balance to calculate interest charges for the current month. These provisions forbid this type of “double-cycle billing.”

Payment Where Payment is Due
Card companies are required to apply any payment above your minimum amount due to your highest interest balance first.

Subprime Bargain
At the time the account is opened, subprime credit cards will have fee limits totaling 25% or less of the credit limit.

Disclosure Is In Demand
Credit card issuers must provide a written explanation of how long it will take to pay off your card’s existing balance and the total cost in interest fees if you pay only the minimum amount due, as well as the total cost in interest to pay off the balance within 3 years.

Terms You Can Live By
Credit card companies must also make account terms and cardholder agreements available to you online.

While provisions like these mark a major victory for consumer protection, this major overhaul is causing some unpredicted aftereffects, including demanding credit approval checks, a reduction in credit card limits, and, in some cases, the sudden closure of these cards by your cardholder.

Despite any good news, if credit card debt and demands have still got you down, an experienced bankruptcy attorney can be a useful resource. Visit the website of The Law Offices of John T. Orcutt for the latest advice and up-to-date information for creating a better financial future.