July 30th, 2009
Credit Cardholder’s Bill of Rights, Changes on the Horizon
The Credit Cardholder’s Bill of Rights Act, passed by Congress in May, places broad restrictions on creditors and reforms the way credit cards are issued and administered today.
The Act amends some deceptive practices used by credit card companies to trap consumers in expensive debt. While many credit problems worsened by these practices can be avoided by using credit wisely, the Bill’s consumer protections, effective late 2009 and early 2010, have long been needed.
How the Act will affect you:
- Credit card companies will no longer be able to arbitrarily change the terms of their agreements with cardholders. If a cardholder is subjected to interest rate hikes due to legitimate reasons, such as not paying a minimum amount within 60 days of due date or portfolio reviews, cardholders will have the right to opt-out of the changes by canceling their card. Cardholders can pay-off the remaining balance in accordance with existing interest rates and terms. In addition, if the interest rate increases because the minimum payment is not received within 60 days after the due date, the rate must go back to the original, lower rate if the consumer makes on-time minimum payments for six months.
- Universal default, which allowed credit card issuers to raise interest rates on credit cards based on your activities on other accounts, will no longer be permitted. What happens on one card will only be relevant for setting interest rates on that specific card.
- Credit card companies will be required to provide consumers with a minimum 45 day advance notice of any interest rate change or significant contract change. Variable rates based on an index are excluded from this notification requirement.
- Not only will your payments be due on the same day each month, but credit card companies must mail billing statements no later than 21 days before the due date.
- Payments made by a cardholder by 5 P.M. EST on the due date will be considered an on- time payment. In addition, credit card companies can no longer charge a fee for telephone and web-based payments, except in the case of expedited payments on the due date or the day before the due date.
- Credit card companies must fairly allocate payments in excess of the minimum payments to the highest interest rate first, and then to the lower interest rate balances; this excludes the last two months before a deferred interest balance is due in which excess payment is applied to the deferred interest balance first.
- Double-cycle billing, which allows the credit card company to use your average daily balance for the current and previous billing cycles, will no longer be permitted. This practice was especially unnecessarily costly for consumers who carried a balance in one statement but not the following statement.
- Credit card companies will no longer be able to charge over-the-limit fees unless the consumer has asked for the account to be set to allow transactions that will exceed the credit limit. Also, only one over-the limit fee may be imposed if the balance is above the limit on the last day of the cycle.
- Rules regarding credit card applicants under 21 will change dramatically. Credit card companies will no longer be able to extend prescreen offers to people under 21, nor can they provide tangible gifts to students on college campuses in exchange for filling out a credit card application. Before a credit card company can issue a credit card to a person under 21, the company will have to obtain the signature of a co-signer over 21 or information indicating an independent means of repaying any credit extended. Even when an under 21 year old applicant presents means of repaying credit, the aggregate amount of credit extended from all of the credit cards will be limited to 30% of the student’s annual gross income from the previous calendar year.
- Promoting greater transparency, credit card companies will have to disclose the period of time it will take and total interest a consumer will pay in order to pay off a balance if only minimum monthly payments are made. Lastly, credit card companies must post their written credit card agreements on the Internet.
I dont like the new rules for students. Just because some students think the dumb T-shirt the credit card companies give our are worth a mound of debt does not mean all do. Between my three cards I have about equal to 80% of my annual income in available credit. I have never once had to pay any interest as I pay my (semi large) bills before the grace periods end.
If this were the case when I got my first card (4 years ago now) I would have never had a credit card and my credit would not be in the high 700’s. I started with a three hundred credit limit and worked my way up, some of these rules don’t let students act responsible, they try to force it… and as we all know that does not work too well.
Adam L
Being a student myself I think this is a step in the right direction; to stem the increasing debt issues surrounding us. A lot of friends and fellow students including myself dip into credit cards to pay for books and everyday essentials to keep us going.
After I found out about this bill, which is due to kick in 2010, I started think well how is my younger brother and his generation going to pay for their my needy purchases when they are exempt from being screened for a credit card?
There are stipulations of course, my parents can co-sign on behalf of Tommy but that doesn’t real help the situation. The idea of this new bill is to hold back from going further into the ‘red’ and so it’s really up to our parents themselves to make that judgment call.
Debt cards and alternative payment options I think are the best solution as you spend within your reach. I also found a website called ebillme that they promote as debt free spending. So there definitely are options that help the likes of my younger brother and co – but it’s all down to having self control.
S
FINALLY, the reigns are being tightened on the credit card companies! My credit problems began one month when I was billed a $39 over-the-limit fee after my finance charge put me over my limit by a mere 36 cents. Then another $39 over-the-limit fee was added on my due date, when I was still over my limit at that point. When I didn’t have the additional $78 to apply to my balance along with my minimum monthly payment on my due date, ANOTHER $39 was added to my account for a “late fee.” Because my account was over my limit when they charged this $39, ANOTHER over-the-limit fee for $39 was added. So now, $.36 turned into $156. The credit card company absolutely REFUSED to work with me on ANY of the fees. I demanded the account be closed, and the company refused, stating they would not close the account until I paid the balance in full. Being a stubborn, hot-headed 20 year-old, I refused to pay any of it, and just stopped paying on the card entirely. Every month another $39 over-the-limit fee and $39 late fee was added to my account. This continued for an entire year until the bank finally closed the account and turned it over to collections. By the time everyone was adding their interest and fees, my $300 credit limit had turned into a $1961 debt. It was all downhill from there. By the way, that was 18 years ago. Collection agencies are STILL trying to collect this debt. Every now & then I get an offer to settle the balance for a percentage of the debt, but never a figure to my liking. I may be older, but still just as stubborn, I guess. Their most recent offer was for $1176. Get this .. they wanted to give me a CREDIT CARD with a balance of $1176 to make monthly payments on in order to pay off the balance, so they would be “helping me on the path to rebuilding my credit.” This credit card would be subject to the same terms and conditions, fees, and interest rates as their current credit cards. LoL No thank you. If they ever agree to settle for the original balance of $300 I’ll pay them. My suggestion to the new under-21′ers attempting to build their credit under the new laws? PREPAID CREDIT CARDS!! There aren’t any co-signers required for those, and they show the same on your credit report as a traditional credit card.