Credit Card Reform? by Vickie Grinder
The Fed is about to implement their new Credit Card Accountability and Disclosure Act which was enacted in 2009. How will this act affect consumers with credit cards? The following is a list of regulations passed by Congress and will take effect Aug. 22, 2010 while some took effect February 2010. Are these the changes consumers have anxiously awaited? Most consumers would agree capping interest rates and fees should have been included in this bill but seems to be left out. Seems they will still be able to hike your interest rate-only they have to give you notice! The bill however, does seems to protect consumer disclosure rights more so than any other change. The following are a list of new regulations obtained from the Federal Reserve.
Among the new limits:
- Credit card companies can no longer impose multiple penalty fees for a single late payment or other violation.
- Any fees charged for violations of a credit agreement’s terms have to be in proportion to the amount of a violation. So, the maximum penalty for a consumer whose $20 minimum payment is late or who exceeds a credit limit by $20 cannot be more than $20.
- The Fed also required credit card companies to reexamine any accounts on which they raised interest rates since Jan. 1, 2009, “to evaluate whether the reasons for the increase have changed and, if appropriate to reduce the rate.”
- When they plan to increase your rate or other fees. Your credit card company must send you a notice 45 days before they can
- increase your interest rate
- Change certain fees (such as annual fees, cash advance fees and late fees) that apply to your account
The following changes took effect February 2009:
- Payments directed to highest interest balances first. If you make more than the minimum payment on your credit card bill, your credit card company must apply the excess amount to the balance with the highest interest rate. There is an exception:
- If you made a purchase under a deferred interest plan (for example, “no interest if paid in full by March 2012″), the credit card company may let you choose to apply extra amounts to the deferred interest balance before other balances. Otherwise, for two billing cycles prior to the end of the deferred interest period, the credit card company must apply your entire payment to the deferred interest-rate balance first.
- Increased rates apply only to new charges. If your credit card company does raise your interest rate after the first year, the new rate will apply only to new charges you make. If you have a balance, your old interest rate will apply to that balance
- Credit card issuers can only charge a maximum fee of $25 if a consumer pays late (as long as they haven’t been late in the past seven months). The new rules also bar credit card companies from charging “inactivity” fees and places new limitations on the fees that they can charge for other violations such as returned checks or exceeding account’s maximum credit limit.
(Source-Federal Reserve)
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