New credit card rules, which are part and parcel of Credit Card Legislation 2009, have passed and a credit card bill of rights seeks to protect consumers. Find a guide to the new credit card rules and learn how the credit card legislation is affecting your credit card bills.
Credit Card Legislation 2009 – the Credit Card Accountability, Responsibility and Disclosure Act
The Credit Card Accountability, Responsibility and Disclosure Act is the Senate’s version of the House’s Credit Cardholders Bill of Rights. With Congress being in agreement over the need for new credit card rules, there is really nothing that stands in the way of Credit Card Legislation 2009. CNN Money ventures a guess that a signature ready bill will be on President Obama’s desk by Memorial Day.
Nuts and Bolts of the New Credit Card Rules
Perhaps the most damning aspect (for credit card companies) is the ban on retroactive interest rate increases. Just yesterday I received a notice from my credit card company (Chase) that advised me of a two percent rate hike on new purchases and the already existing balance. Under the new credit card rules, this kind of business practice is banned.
Moreover, you may request an undoing of a rate hike that is in keeping with your credit card agreement – usually brought on by late payments – if you keep a six months track record of timely payments. Credit Card Legislation 2009 also stipulates that the 0% teaser rates and other promotional percentage rate incentives remain in effect for six months.
Under the credit card legislation, new credit card rules also put in effect a change in the way payments are applied. While the minimum payment due is continued to be allocated as usual, any overages must be applied to the highest interest rate bearing charges on your credit card bill (usually cash advances) as opposed to the lowest interest rate charge (usually a promotional rate or special offer).
Is the Credit Card Bill of Rights a Short Lived Love Fest?
The Los Angeles Times quotes democratic New York Senator Charles Schumer as stating that the new credit card rules are a response to the credit card industry’s repeated crossing of lines that were put in place to protect consumers. Credit Card Legislation 2009 was hotly debated and opposed by the banks issuing credit cards, and while consumer advocacy groups are celebrating, banks are not rolling over quietly in the wake of the new credit card rules.
Banks have advised that the new credit card rules will be greeted with an increase in annual fees and a cancellation of incentive perks — especially cash back deals and mileage accumulation. There is talk of charging interest the moment a credit card transaction is registered. What is more, banks – already tightfisted when it comes to consumer lending – argue that they will offer even less consumer lending via credit cards.
This then begs the question: who will pay for the fees the average credit card bill holder no longer provides? After all, the L.A. Times confirmed that banks receive a staggering $15 billion a year just in penalties. Leave it to the New York Times to spell it out in detail: banks will make up their losses on everyday credit card accounts from consumers with stellar credit, usually those who pay their bills in full each month.
Will the new credit card rules from Credit Card Legislation 2009 bring about the help consumers demanded, or will lenders circumvent the credit card bill of rights and continue to cross the lines Mr. Schumer mentioned? Then again, will a curtailing in lending change the way America does business and get consumers and businesses back on more stable, fiscal ground?
Sources
http://moneyfeatures.blogs.money.cnn.com/2009/05/19/what-credit-card-legislation-means-for-you/; http://www.latimes.com/business/la-fi-credit-cards20-2009may20,0,4559970.story; http://www.nytimes.com/2009/05/19/business/19credit.html?_r=2&hp
