New Credit Card Rules Starting Today

[Henry]

Starting Monday, banks will need to abide by new regulations on terms and disclosures. The idea behind the landmark law was to prevent banks from using practices that often dug borrowers deeper into debt.

A look at how the credit card law affects key aspects of your account.

INTEREST RATES:

THEN: Banks could raise the interest rate on an account at any time, including the rate on existing balances, even if you weren't late on payments.

NOW: The rate cannot be raised in the first year after an account is opened unless an introductory rate has come to an end. After that, cardholders must be notified 45 days in advance of any rate change. For existing balances, rates can't be raised unless the account is at least 60 days past due. If payments are made on time for six consecutive months, the original rate must be restored.
There's still no cap on rates.

DISCLOSURES

THEN: The fine print on cardholder agreements was often difficult to understand. Rates, fees and penalties for other services such as cash advances, for example, could be hard to find. The impact of the interest rate on paying down a balance was hard to compute.

NOW: Cardholders will see how many months it will take to pay off a balance if only minimum payments are made. Statements will also indicate how much needs to be paid each month to pay off a balance within three years.

SERVICE FEES

THEN: Banks could charge as much as they wanted. They could assess annual fees, activation fees and other fees. This was mostly a problem for subprime cards marketed to those with poor credit scores. One popular card, for example, the Premier Bankcard, charged $256 in first-year fees for a $250 credit line.

NOW: Service fees, such as activation and annual fees will be capped at 25 percent of the credit limit during the first year of use. After that, there is no cap.

GRACE PERIODS

THEN: Some card companies sent out statements not long before payments were due, and sometimes shifted payment due dates from month to month, meaning that payments would not always have enough time to arrive and get processed before being deemed late. As a result, some cardholders ended up getting charged interest or late fees even when they thought they were sending in payments on time.

NOW: The law requires that due dates remain consistent. Statements must be sent out 21 days before the payment due date, and finance charges and fees cannot be applied before that period is up. In practice, about half of card issuers have extended grace periods to as long as 25 days.

OVER-THE-LIMIT FEES

THEN: Banks set credit limits and then routinely allowed charges to exceed those limits. When that happened, though, the customer was charged an over-the-limit fee as high as $39. These fees were often triggered by interest charges or late-payment fees that pushed a balance over the credit limit. What's more, multiple over-the-limit fees could get charged in a single billing cycle if the balance was paid down and another charge pushed the balance back over the limit.

NOW: The cardholder must specifically agree to permit transactions that exceed the credit limit. Only then can over-the-limit fees be charged. But the fees can't be triggered by other fees or interest charges. Only one over-the-limit fee may be imposed during a billing cycle. No over-the-limit fees may be charged unless the cardholder has specifically agreed to permit transactions exceeding their authorized credit limit. These fees can no longer be triggered by other fees or interest charges imposed by the card issuer, and only one such fee may be imposed during a billing cycle. In practice, several of the largest card companies have dropped these fees. Some banks are using pop-up boxes on their Web sites or other methods to obtain consumer authorization.

UNIVERSAL DEFAULT

THEN: If you made a late payment on one credit card or loan, or even late payments for obligations like utility bills, that could trigger interest rate hikes on other credit card accounts.

NOW: Card companies cannot raise interest rates on existing credit card balances. Interest rates can't rise during the first year an account is open, unless the original agreement spelled out a promotional rate for a limited time. Consumers with older accounts must be informed of any interest rate increase on new charges at least 45 days in advance. They must also be given a chance to opt out of the hike by canceling the account and paying down the balance at the old interest rate. If an interest rate is increased, the card company must review the account once every six months to assess whether the rate should be dropped.

STUDENTS

THEN: Students arriving on college campuses often confronted a gantlet of credit card marketers handing out T-shirts, pizza and other gifts in exchange for filling out card applications. Credit cards were frequently handed out without checking the applicant's income sources. In 2008, 84 percent of undergraduates had at least one credit card. Average balances topped $3,100.

NOW: Credit cards may no longer be issued to anyone under age 21, unless the applicant has a co-signer, or can show independent means to repay the debt. Colleges must disclose any marketing deals they make with credit card companies. Banks are not allowed to hand out gifts on or near campuses or at college-related events.

[trussell]

I think the last part- about marketing to students is more or less on the right track, especially when they may not have verifiable income.

[mary]

Report on Vermont Public Radio this morning: Some card companies are adding new fees to make up for revenue they feel will be lost under the new rules.  For instance, some card holders may see a charge for using their card internationally.  Interviewee noted that he often limit the amount of cash he brought on vacations, thinking it was easier/safer to use a credit card. He's now see a high fee applied to charges made out of the country...   

[Chris Santee]

Congressman Peter Welch
United States House of Representatives

FOR IMMEDIATE RELEASE
Monday, February 22, 2010

Welch calls for cap on credit card interest rates

As consumer protections take effect Monday, Welch argues for stronger legislation

WASHINGTON, DC – As new provisions to curb credit card company abuses took effect Monday, Rep. Peter Welch renewed his call for a strict cap on interest rates.

Citing recent moves by credit card companies to raise interest rates and impose new fees on consumers, Welch called for swift passage of the Restoring America’s Commitment to Consumers Act (H.R. 4300), which would set a 16 percent ceiling on credit card interest rates.

“Cracking down on the abusive practices of credit card companies is like playing ‘Whack-a-mole.’ As soon as you rein in one of their schemes, they pop up with another,” Welch said. “Mandating an across-the-board interest rate cap is the only way to keep credit card companies from charging rates that would make the mafia blush.”

Welch renewed his call for an interest rate cap as key elements of the Credit CARD Act – more commonly known as the Credit Cardholders’ Bill of Rights – took effect Monday. Welch fought to strengthen that bill last April by introducing an amendment to cap interest rates.

The Credit CARD ACT, which Welch voted for, includes the following provisions that will be enacted today:

·       Prohibits arbitrary interest rate increases and universal default on existing balances;

·       Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions, and also limits over-limit fees on electing cardholders;

·       Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;

·       Prohibits issuers from setting early morning deadlines for credit card payments;

·       Prohibits interest charges on debt paid on time (double-cycle billing ban);

·       Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;

·       Protects recipients of gift cards by requiring all gift cards to have at least a five-year life span, and eliminates the practice of declining values and hidden fees for those cards not used within a reasonable period of time.

In addition to promoting consumer credit card protections, Welch has also been working to crack down on fees paid by small businesses every time customers pay with a credit or debit card. Welch is the author of the Credit Card Interchange Fees Act (H.R. 2382), which empowers small businesses to fight unfair swipe fees.

[Henry]

Albert Brodeur sent me the following note to post:

If it is issued by a credit union the intrest rate is capped at 15%

[ohhman]

There ought to be something added to the new regulations that NO business has the right to charge your credit card for a new subscription to a previous one without the card holders new authorized consent!  This has happened to me twice in the past few months!  One was for my son's subscription to Sirius Radio for a new year & the other to McAfee protection on our computer. Both renewed using my past year's credit card information WITHOUT my permission, along with raising their rates.  I was not happy & let them know this won't happen again.....credit card was cancelled to make sure it doesn't. 

[trussell]

3+K, No company can "automatically" charge your credit card without your consent.  What most likely happened is that there was a fine-print clause that enabled them to do it when the initial contract was signed.  It probably said something to the effect that if they aren't notified within 30 days of contract expiration, then they will (for your convenience of course) automatically bill you for the next month/year/decade.

[special ED]

dont spend more that you have and you wont have to worry about high interest rates ,

[PotterFXFD]

 I was shocked when after a full year of full time employeement out of high school ,  I couldn't get a major credit card. (wanted one because I traveled on the raod a lot for work) and my sister a full time UVM student could get several . I ended up getting a gas company card to build a credit record so I could get a visa with a $500. limit. But a college student with limited income could get cards with $1500.00 limits.

O well   we both have cards now

[al brodeur]

a added note is that the max intrest that a credit union may charge is 15% on a card issued by them