Now that the Credit Card Bill of Rights has become law, consumers will be protected from the many unfair charges and abusive penalties that were imposed with little warning by lenders.
The legislation intends to end the industry’s practice of confusing their customers with fine print and complicated policies. Almost everyone recognizes that credit card issuers have been stacking the deck against vulnerable consumers and the bill moved quickly through Congress and was signed Friday by the president.
Once the law takes effect next year, it will limit the ability of card issuers to arbitrarily raise rates. The rate for a new account will be good for a year, and promotional rates must remain in effect for six months.
It has many other protections for consumers:
Credit card companies generally won’t be able to hike rates on existing balances. As long as customers remain reasonably up to date with payments, lenders cannot use other credit data to raise the interest rate.
Customers must be provided with 45 days notice and an explanation before their rates can be increased.
Customers won’t automatically be allowed to exceed their credit limit ”“ they must opt-in for such authorization in advance ”“ and there is a cap on over-the-limit charges.
New regulations will control the amount that can be charged for late fees and other penalties.
Those under 21 will have to show a source of income, or a co-signer, to be issued a credit card.
Finance charges based on a double-billing cycle (which raises costs for borrowers who carry a balance from one month to the next) are generally prohibited.
Statements must be sent at least 21 days before the due date.
If two or more APRs apply to an outstanding balance, payments beyond the minimum must be credited to the higher APR first.
But these welcome improvements won’t end customer frustration with credit card companies. As many commentators have noted, this kind of unsecured credit will become harder to get once lenders options are limited. And annual fees and higher rates are likely to become commonplace as the industry’s other revenues are curtailed.
Customers should be prepared to take a careful look at any correspondence from their credit card companies in the months ahead. They could be notices of new fees and rates that will take effect before the Credit Card Bill of Rights takes effect.
With the credit card industry poised for major change, customers should be prepared to shop around for new arrangements.
— Questions? Comments? Contact Kristen Schulze Muszynski or Nick Cowenhoven at 282-1535 Ext. 322 or 327 or at kristenm@journaltribune.com or ncowenhoven@journaltribune.com.
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