With the enactment of The Credit Card Accountability, Responsibility and Disclosure Act of 2009, commonly referred to as The Credit Card Act of 2009, several changes have occurred that will dramatically impact how Americans utilize their credit cards, debit cards, and gift cards. Are you aware of your rights and protections under the new law?
Your credit, debit, and gift cards have become more consumer-friendly. The Credit Card Act of 2009 authorized the Federal Reserve to establish new rules regulating the credit card industry. Several provisions took effect on Feb. 22, including 45 days required notice for interest rate hikes, restrictions on obtaining a credit card for those under age 21, and the elimination of double cycle billing.
Effective 12:01 a.m. today, the final batch of regulations became effective. For the most part, these new rules protect consumers from unreasonable penalty fees and excessive interest rates. These rules are particularly important if you are struggling with high credit card debt.
For those consumers who carry a balance on their credit cards from month to month, having low interest cards can save a lot of money. Unfortunately, many companies have gone in the opposite direction, substantially raising rates for millions of consumers on their credit cards. The new rules will help in several aspects.
• If a company increases the annual percentage rate on your credit card, they must explain why. While this rule will not prevent a rate increase, a reason must be provided for said increase (such as a lower credit score), and consumers will have an opportunity to address the issue.
• If a company increases your credit card interest rate, they must re-evaluate that increase every six months. If the reason for said increase has been resolved, they must reduce your interest rate to the former level within 45 days of completing a reevaluation. This rule is particularly important to consumers who have seen their interest rates skyrocket due to lower credit scores.
Credit card companies have become known for excessive fees and charges. From late payment fees to over-the-limit charges, credit card fees have become a consumer nuisance. While the new regulations will not eliminate these fees, they should reduce them.
Credit card companies can no longer charge a penalty fee in excess of $25 in most instances. There are some limited exceptions to this rule. For example, if the company can substantiate costs in excess of $25 as a result of said late payment, the penalty may exceed $25. Moreover, if you were delinquent in the last six months and pay late again, the penalty may be increased to $35.
• Consumers cannot be charged a late payment penalty in excess of your minimum payment. This avoids the practice of companies adding a $39 late payment penalty because you were a few days late on a $10 minimum payment.
• Credit card companies can no longer charge a fee for dormant accounts. Called an inactivity fee, some companies assess a fee if you did not use the card enough. The new rules eliminate this practice.
• Credit card issuers cannot charge more than one penalty fee for each transaction or event that gives rise to said fee. For example, if you were late with a payment and the penalty fee caused your account to exceed its credit limit, companies cannot assess an over-the-limit charge in addition to the late penalty fee. The new regulations put an end to this double-penalty practice.
Only time will tell how well these regulations work at protecting consumers. In some cases, new regulations cause companies to find alternate ways to raise revenue, such as increasing annual fees or reducing other benefits. For now, though, consumers may get some relief from excessive credit card fees and rising interest rates.
To learn more about The Credit Card Accountability, Responsibility and Disclosure Act of 2009 and your rights and protections under the new law, visit http://www.tinyurl.com/thecreditreport.
William E. Lewis Jr., is a credit repair expert and host of “The Credit Report with Bill Lewis” on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.