August 20, 2009

• Reflections on New Regs, Pt.3
    More help is on the way.

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  With this last-mention provision called the "opt-out" provision, consumer will have some options when it comes to credit card changes of negative impact to them. If the consumer deems the change to be too adverse, he or she will have the right to"opt-out" of the change and refuse it. By making this choice, however, some concessions must follow. One of the concessions is the agreement that no further charges will ever be placed on the credit card. In some cases, the account may become frozen. In other cases, however, the effect of any further charges against that credit card will be tantamount to accepting the changes and being bound to them.

  In the case where the interest rate has been hiked, by opting out, the consumer will be relieved of having to pay the new higher rate in finance charges. No new charges must be placed on the card and the total balance must be paid off within five years. This may involve changes that the minimum payment amount will be increased to the level which provides that the loan is paid off on time if only making minimum payments. In order to take this route, a consumer is required to notify the lender of such intention in a timely manner. The lender will then have the option to close the account at any time. This is not a major consequence since, the card isn’t to be used anymore anyway. The card must still be paid off within five years.

  What’s on-deck for October is the disallowance of "over-the-limit penalties"."Over-the-limit" penalties actually came into being as a convenience service. Years ago, many credit card holders opted to pay an added fee to for the cases they might charge a little over the amount remaining as their "option-to-buy". To avoid the embarrassment or inconvenience of having a transaction rejected at the counter, some elected to pay more for the service of allowing the transaction to go through. Over time, it was realized by the lenders that this technique could be very lucrative is imposed as a convenience-charge (alias "penalty") on all card holders. The new provision will allow the consumer, once again, to make that choice after October.

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