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| Credit Answers > Debt-Management-Articles-2009 > New Credit Card Laws Favor Consumers |
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We have previously discussed the Responsibility and Disclosure (CARD) Act. This set of provisions has recently merged with the Credit
Cardholders' Bill of Rights. On May 22, President Obama officially signed the CARD Act and the new regulations will take effect in February 2010. This set of laws is a major milestone for the credit
card industry and may be instrumental in ending deceptive practices that affect consumers. Below is a brief outline of some of the changes that will take place under the CARD Act.
What Will Change?
According to the Center for Responsible Lending, a non-profit research organization, the following new laws are definite and may benefit consumers.
Applicants under the age of 21 will not be able to get approved for a credit card unless they obtain a co-signer or show they have sufficient income.
Creditors will be required to give cardholder's 45 days notice before changing rates. After a new account is opened, rates will not be able to be increased during the first 12 months.
Promotional rates must last six months. Card companies can still raise rates in the event of delinquencies, but must lower the rates if the cardholder stays current for a period of
six months.
Bills must be mailed at least 21 days before the due date rather than the current 14 days. Early morning deadlines will also be banned.
Over-the-limit fees can only be applied if the consumer consents to over-the-limit transactions.
Card companies must apply payments above the minimum payment to the highest interest rate balance.
How may this affect the credit card industry?
The Motley Fool (www.fool.com), a financial education site, indicates that credit card issuers may cut back on certain benefits in order to recoup lost
revenue from these new laws. For example, grace periods and cards without annual fees could become obsolete. Credit card perks and reward programs could also be eliminated. As many consumers have also
experienced, creditors may continue to lower credit lines to reduce risk. It may also become more difficult for applicants to obtain credit, especially those with weak credit histories.
Credit Card Stats:
A recent study of the 12 major credit card issuers determined that all had one or more rules that would now violate the CARD Act. Below are some findings:
93% of issuers could raise the interest rate at any time
72% of cards included offers of low promotional rates which issuers could revoke
The median penalty rate of 27.99% would add charges of $100 and $180 annually for every $1,000 in revolving purchasing debt
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