Credit card bill that passed - coming credit card law
Once become law, the bills, that are to the best of my knowledge are House bill H.R.627 and Senate bill S.235, will not take effect for a year. The only exception taking effect in 90 days, is a requirement that customers get 45 days notice before their interest rates are increased. Here are the main points of the credit card bill which Obama will undoubtedly sign into law shortly,
- 30 day notice to consumers before their accounts are closed
- interest rate hikes on existing balances are allowed only under limited conditions, such as when a promotional rate ends, there is a variable rate or if the cardholder makes a late payment
- credit card issuers can't raise interest rates unless a payment is more than 60 days past due, and if borrowers then pay on time for the next 6 months, they get original interest rate back
- interest rates on new transactions can increase only after the first year
- any significant change in account terms must be preceded by 45 day notice
- end of universal default, meaning if you default on credit card 'A' or utility bill, interest rate on credit card 'B' or 'C' can not be raised
- at least 21 day grace period to allow more time to pay monthly bills
The upcoming credit card law would also ban credit card issuers from setting arbitrary deadlines for payments. Cutoff times set before 5 p.m. on the payment due dates would be illegal under the new law. Payments due at those times or on weekends, holidays or when the card issuer is closed for business will not be subject to late fees.
The law would also require that the highest interest balances are paid first - complete opposite of what credit card issuers do now, applying all amounts over the minimum monthly payments to the lowest interest balances first, thus extending the time and increasing consumer cost, it takes to pay off high interest rate balances. When consumers have accounts that carry different interest rates for different types of transactions, like purchases, balance transfers with promotional APRs, cash advances, etc. - payments in excess of the minimum amount due would have go to balances with higher interest rates first.
The over-the-limit fees would only be charged when a consumer opts in to over-the-limit fees. If charged, fees must be reasonable. If consumers choose to opt out, their transactions would be rejected if they exceed credit limits with no over-the-limit fees.
The coming credit card law also ends two-cycle or double-cycle billing game, played by credit card issuers, which often go back to the previous billing cycle to calculate interest charges, hitting consumers with finance charges from the previous cycle even though the bill was paid in full. Finance charges on outstanding credit card balances would be computed based on purchases made in the current cycle .
The bill limits upfront fees charged by credit card issuers to the people with bad credit, eating up huge chunks of their available balances. These account opening fees would be capped at 25% of the available credit card limit in the first year of the card.
Finally, credit card issuers must disclose to cardholders the costs of making only minimum payments each month, showing how long it would take to pay off the entire balance if consumers only made the minimum monthly payment, and how much in interest it would cost. Moreover, consumers must also be given information on how much they must pay each month if they want to pay off their balances within 12, 24 or 36 months, including the amount of interest.
These are the benefits of the credit card bill, and as good and well intended it is, there is a growing fear that to recoup loss revenues from consumers who default, issuers will have to go after their best paying customers.
Thu May 21, 2009 04:05PM | Copyright: www.bad-credit-advisor.com | More in Personal Finance | Comments (0)
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