New rules to protect credit card holders - Effective August 20, 2009

Yesterday, a new consumer protection law came into effect. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) is intended to protect consumers from unexpected and massive interest rate hikes on the terms of their credit cards.

"The new rules of the road established by the Credit CARD Act will shield credit cardholders from widespread abusive practices," Senate Banking Committee Chairman Chris Dodd, D-Conn., the bill's author, said on Wednesday.

The most significant changes anticipated by the new law actually are scheduled to take effect during February 2010, but below is a brief listing of those changes taking effect immediately:

• Consumers must be given at least a 21-day from the date a bill is mailed to make their payment (currently only a 14-day notice is required).

• Consumers must be given at least a 45-day notice before making significant contract changes, particularly with regard to interest rate and fee increases (currently only a 15-day notice is required). However, be warned of the following inapplicable scenarios, where you may not receive warning:
• an introductory rate that expired;
• variable interest rate cards; or
• if you have a reduced rate under a hardship or “workout” plan and fail to make payments as agreed.

Consumers shall have right to opt out of interest rate and fee increases. If a consumer chooses this option, the credit card at issue may be cancelled and any outstanding balance may be paid under the previous terms (currently, issuers are not required to offer this option).

                                                                                            

While these changes are significant and will hopefully help consumers to keep credit card payments under control, watch out for more stringent credit approval checks, decreased credit limits, sudden closing of credit cards by your cardholder, and more. There is even more to come on February 22, 2010, so stay tuned.

Still to come...

• What difficulties might consumers encounter as credit card companies are required to adhere to stringent Credit CARD Act requirements?
• What changes will be taking effect as of February 2010?
• Might these changes spare some people from the need to file bankruptcy?

by: Greta LaMountain, Esq.