In May, a new law was signed into effect that was designed to reduce some of the most unfair and abusive credit card practices. That law, called the Credit Card Accountability, Responsibility and Disclosure Act, had several provisions that took effect in August 2009. (Sometimes that law is referred to as the Credit Card Bill of Rights.) Other provisions will take effect next year. This article summarizes some of the changes resulting from this new law, as well as some loopholes that will undoubtedly be used by credit card companies.
The first change is that credit card companies must now give you 45 advance notice before they raise your interest rate. The old law required only a 21 day notice. However, there’s a catch: this applies only to fixed-interest-rate credit cards, and not to variable-rate credit cards. This helps explain why some credit card companies have been trying to get their customers to shift to variable-rate cards.
The second major change is that the credit card companies must now mail your statement to you at least 21 days before the due date. This gives 7 additional days to get your payment in on time.
Your interest rate cannot be increased retroactively unless your payments are late by at least 60 days. Also, you can restore your earlier, lower interest rate if you then make payments on time for 6 months.
Fees cannot be greater than 25% of the credit limit on the card. The earlier law allowed such charges to eat up half of the credit limit. This provision is particularly helpful to those who have bad credit or subprime credit cards.
If there is more than one interest rate applied to purchases or advances under your credit card, the issuer must apply any payments exceeding the minimum payment first to those portions that have the highest interest rate. This can reduce the amount you pay in interest.
Fees for penalties must now be reasonable and proportional to the provision of the agreement that was violated; such penalties can no longer be automatic without any reasonable basis for them.
The new law also allows you to “opt out” of any changes to the terms of your agreement, including any increases in the interest rates or fees. If you refuse to accept the increases, however, you cannot use your credit card anymore, and you must pay the balance off within five years.
Unfortunately, even under the new law, the credit card companies are not required to give you any advance notice before lowering your credit limit or even closing your account altogether. These actions can actually lower your credit rating, and you may not even know it until your card is rejected at a cashier when you are buying something.
All in all, this new credit card law is a significant improvement compared to the old law. However, there are still far too many ways that the credit card companies can take advantage of you.
If you are sued on a credit card debt, we may be able to help you. All too often, we get phone calls from people who acted too late or thought they could handle the situation themselves. Some admit they were unprepared, unfamiliar with the legal terms or legal procedures, or became nervous when they stepped into the courtroom. I offer free consultations and would be happy to discuss your situation with you. Helping Florida Consumers is what this blog is all about.
