August 19, 2009
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Weathering CC Weather, Pt.3
What changes are coming?On May 22nd, President Barack signed the CARD Act of 2009 (Credit Card Accountability, Responsibility, and Disclosure) into law. Of course, there was a ceremony in the White House to hail this long-awaited triumph (over two years). But what was the real significance to celebrate? Tens of thousands of credit card holders has made formal requests to Congress to protect them. Senator Dodd had picked up the baton and started a two-year up-hill battle to come to their aide. When the day finally came, were the credit card consumers any better off?
The immediate answer was "No, they were worse off". The enforcement of the bill's items were to be phased in over time. So, at the onset, the credit card lenders knew the clock was ticking and they'd better get what they could while they still could. This has placed credit card holders in a tenable position since that time.
Time is, however, moving on and the days are fast-approaching when the various provisions of the bill will take effect. The main credit card protection provisions of the bill are:
Ø Restricting the lenders levity to raise credit card interest rates without 'reasonable cause'. In the final rendition, this has been heavily watered down. Only in the most extreme will the government get involved in rate hikes.
Ø At least a 45-day notice will be required before increasing rates on new credit card transactions. Previous balances will not be subject to these rate hikes.
Ø Consumers must be afforded reasonable time to make credit card payments. Several thousand complaints had been lodged over this abuse. Classifications of delinquency status and the appropriate measures banks are allowed to take concerning these will be established.
Ø Limiting rate hikes on existing balances. Only applicable portions of credit card debt will be affected by necessary rate hikes.
Ø Raising rates over defaults not related to the credit card industry ("universal default"). For example, being late on a cable bill can not jack your credit card interest through the roof.
Ø Fees for going over a credit limit will be prohibited.
Ø "Penalty" fees will have to be deemed reasonable and proportional.
Ø Students under the age of 21 will need a co-signer to get a credit card.