The much-lauded Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) was signed into law on May 22, 2009, with the promise of protecting consumers from predatory and underhanded practices of credit card companies. While the most significant changes imposed by the law won't become effective until February 2010, there were some that became effective immediately. Upon it's passing, the law gave cardholders:
-¢at least 21-days between the date a bill is mailed and the due date (changed from the 14-day notice requirement);
-¢at least 45-days notice before Credit Card companies can make significant contract changes, particularly with regard to interest rate and fee increases (changed from the prior 15-day notice requirement); and
-¢the right to opt out of interest rate and fee increases. If you choose this option, the credit card at issue may be cancelled and any outstanding balance may be paid under the previous terms (previously, a consumer had no choice but to endure the increased rates and fees and could not close the account until it was paid in full).
Not feeling particularly "relieved' yet? These initial changes are nice, but really don't do much to transform the living hell that credit card companies have created for their victims. Fast forward to February, 2010, when the law's "big dogs- will finally be unleashed:
-¢Retroactive interest rate increases are banned except when a cardholder is more than 60 days late paying a credit card bill;
-¢If a cardholder's interest rate has been increased, the credit card company must review the cardholder's account after six months, and return to the previous lower rate if the cardholder has made on-time payments;
-¢Promotional rates must apply for a minimum of 6 months before the rate can be increased;
-¢Interest rate cannot be increased within the first 12 months after a new account has been opened;
-¢The practice of universal default and double-cycle billing is illegal;
-¢Over credit limit fees are now prohibited unless a consumer specifically agrees to allow a transaction to go through despite instead being denied for being over their credit limit;
-¢Payments must be credited as timely if the payment is received by 5 P.M. on the due date;
-¢Creditors must disclose how long it would take to pay off a credit card balance if cardholder makes only the minimum payment each month;
-¢Creditors must disclose the total cost of in interest if a cardholder makes only the minimum payment each month;
-¢Late payment deadline and postmark date must be clearly disclosed to cardholders;
-¢Credit cards cannot be issued to people under the age of 21 unless they have an adult co-signer or show proof that they have the means to repay the debt (proof of reasonable income).
-¢College students are required to get permission from their parents or guardians in order to increase credit limit on joint accounts they hold with those adults.
-¢ Anyone under the age of 21 is protected from pre-screened credit card offers unless they specifically opt-in for such offers.
These provisions could go a long way to give credit card holders some real relief. This law has been a long time coming for consumers who have been taking it in the shorts from big banks for years, but will it really accomplish, in practice, what it aims to do on paper? And how come, in the months following the passage of the Credit CARD Act, which would seem, on it's face to be the death knell to the industry, the stock values of credit card issuers have seen growth upwards of 50 percent? Why has American Express stock increased nearly184% in the last 6 months?
The answer lies, in part on the industry's preemptory strategy of increasing all credit card holders' interest rates around 10% across the board in anticipation of the Credit CARD Act. No doubt investors have taken notice of the companies' cash influx. And don't forget the mortgage industry collapse that has decimated consumer equity lending. Apparently, due to staggering job loss and a frozen mortgage industry, credit card usage is doing just fine as people struggle to keep the electricity on and food on the table.
Even amidst zooming stock values and, in the cases of Citibank and American Express, access to cheaper-than-dirt federal money (-0.25%) (because they are now partially owned by Uncle Sam as a result of taking bailout funds) credit card companies have begun to exact revenge on consumers in new, more creative ways for what they perceive as the government's meddling in their "affairs-. We are already seeing how they abuse debtors by suddenly closing their accounts, raising monthly minimum payments, and lowering credit limits to meet the account balance, thus causing the cardholder's FICO scores to plunge. The scoundrels are also imposing new annual fees, higher balance transfer fees, international transaction fees, higher cash advance fees, reduced award programs, all while continuing to advertise about the "privileges- of membership.
The Credit CARD act does offer some light at the end of the tunnel for debt weary consumers when the bulk of its provisions become effective in February 2010. The real question is whether those consumers will still have a financial pulse when that day finally arrives.
If you have credit card debt, you don't need to wait for relief. Call a qualified bankruptcy attorney today to discuss your options. In North Carolina, contact the Law Offices of John T. Orcutt for a free initial debt consultation. That's right, it's free. 1-888-234-4181.