Credit Cards - Consumers Win

Credit Cards - Consumers Win

As of August 2009, there are new rules in effect for credit cards. So make sure you are aware of them. Somehow a Democratic Congress was able to force the banks to capitulate and accept these new regulations. Although watered down, they protect you the consumer, and not the banks. Had the Republicans still controlled the Congress, this law would have never made it onto the books. Money talks in Washington and the banks put a fortune into trying to kill this act before it became law. The act we are referring to is the Credit Card Act of 2009. The technical name is the Credit Card Accountability, Responsibility and Disclosure (CARD) Act.

The following are the key sections of the new rules for credit cards:

1) You now must be given a warning regarding any changes the banks want to make to your account. Such warning must be made 45 days prior to the adjustments taking place. Before the law took effect, the banks had to only give you 15 days notification. Defaults do not apply however. Once you are in default, interest-rate increases would go into effect immediately, and the 15 day rule no longer applies.

2) I have noticed that with some banks, they send you a bill, and before you know it, payment is due. This is because some banks give you very little time to pay your credit card bill. It's almost like it's due immediately. The reason is they want you to be late, so they can tag you with the late fees which make banks a fortune. They love that ridiculous late fee because it makes banks billions of dollars, that's right billions of dollars every year. It also allows them to screw the consumer over. The new credit card law forces the banks to give you a minimum of 21 days to pay the bill. This means no late fees for a minimum of 21 days.

3) You now have the right to say absolutely no to interest-rate increases. Before the law went into effect, each bank had the right, and they used it to offer you an opt-out option. The problem was, it was their right, not the consumer's right. Now you, the consumer also have the right to cancel your account and then pay off the balance while the old lower interest rates apply. This is a big deal. It means the banks cannot just pick a high balance account and say, let's change the interest rate by doubling it, and force you to pay off the old balance under that higher interest rate. You need to walk away from the high interest rates, especially in this economic environment. You pay off the old balance, but you don't need to accept the bank's higher rates. This is good for the consumer, and it's bad for the banks, who are the people that brought you the financial panic of 2008.

There are numerous parts to the credit card bill, that we can't cover here. There are limitations on interest rate increases. There are bans on marketing, and also issuing new credit cards to people under 21, and college students. The consumer really benefits in February of 2010, when there will be a whole array of new regulations on gift cards.

The banks take it on the chin again in July of 2010 when new requirements will be put into effect. In 2010, there will be much more disclosure required regarding fees, and rates and terms that must be on each and every monthly consumer credit card statement. We are also going to see new rules on credit card applications, and mailers that you and I have been dreaming about for years.

It took Congressional action plus the Federal Reserve Board, as well as federal banking regulators to force the banks to concede to these new rules, and oh yes, the financial panic of 2008 made it possible.