August 12, 2009
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News: Provisions of CC Law Begin
The first steps in the credit card reform legislation approved in May will be taken next week. The provision that becomes effective next week requires credit card companies to give a 45 day notice prior to any interest rate increase. The law also calls for a 45 day notice to any changes in terms and conditions of the card contract. Many of the major card companies have already begun making changes to the interest rate terms. Most have switched from a fixed interest rate to a variable interest rate. Some customers have said they were given the option of opt out of the changes; however, were required to close their credit card accounts down to further use while they continue to pay off the balance as originally agreed.
Credit card companies must also being sending card statements out 21 days in advance of the minimum payment due. It is speculated that many of the lenders have been making the recent surge of credit card changes in anticipation of the new law. Many consumers have recently complained that the card companies have slashed their limits and shut down accounts for no valid reason. Lenders say they are only acting to minimize losses and protect themselves from the continued record breaking delinquencies and defaults. Consumers have also complained that their interest rates have been raised without notice and for not reason. Banks on the other hand, maintain that they have always followed the terms of the contracts which simplify that interest rates are subject to increase when the account experiences late payment.
The remainder of the new credit card law will become effective in February, 2010. It will end the practice of double cycle billing and limit lenders’ ability to make arbitrary interest rate increases. It also requires lenders to review every account after six months where the rate was increased because of late payment. Additionally, any such interest rate increase will be prohibited until the account is 60 days late.