August 03, 2010
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Managing Under New Credit Card Rules, Pt.2
Benefits for cardholders.While there are a few rules that will not become effective until August 22nd, some of the Credit CARD provisions have already implemented. An important one is that cardholders have been given a longer time period to pay card account bills from the time the lender processes the monthly statement. Financial Institutions must give credit card customers at least 21 calendar days from the date the account statement is mailed out before the payment is due. Cardholders will also be protected from arbitrary rate increases because new rules prohibits retroactive rate increases on existing credit card balances due to "any time, any reason" or "universal default" and strictly prohibits retroactive rate increases due to late payments. Added protection with be given with a "First Year Protection" provision which states that contract terms and conditions must be clearly written and remain stable throughout the entire first year of the account opening.
Lenders have stricter guidelines on promoting special credit card interest rates. Promotional rates may be offered to new as well as existing accounts; however, these rates must be clearly communicated and must remain in place for a minimum of six months. Additionally, the Act gives lenders stricter guidelines on charging late fee traps resulting from payment deadlines with due dates that varying from month to month, are scheduled on weekend days, or fall in the middle of the day such as 5:00 p.m. The law also requires lenders to give consumers the ability to opt out of over-the-limit protection which results in high fees. Prior to approving any over-the-limit transaction and apply any service fee for the option, lenders must obtain the credit cardholder's permission.
A valuable part of the Act is the fair interest calculation provision which requires the credit card company apply any excess payment over the minimum payment due to the highest interest rate balance first. The practice of "double-cycle" billing where a lender calculates interest for the current month off the balance of the previous month is prohibited by new rules.
Sub-prime accounts have added protection from unfair fees. These sub-prime accounts are generally issued to lower economic or low credit score consumers that have difficulty getting approval for lower interest rate credit card accounts.