New Rights for Credit Card Holders Go Into Effect Tomorrow
"This is a good first step towards addressing some of the practices of the credit card industry that consumers have complained about and that have hit many of them so hard," commented Barbara Anthony, Undersecretary of Consumer Affairs and Business Regulation.
The new rules are being phased in this year and next in three stages under the act, which was signed into law by President Obama on May 22.
Among the provisions that go into effect on August 20:
- Credit card issuers are required to adopt reasonable procedures designed to ensure that consumers' statements are mailed or delivered at least 21 days prior to the payment due date and the date on which any grace period expires;
- The penalty for failing to send cardholders their statements in sufficient time such that the creditor cannot treat a payment as late nor collect any finance charges or late fees on that payment;
- Credit card issuers are required to give at least 45 days advance written notice of significant changes related to a dozen specific account terms, including raising the interest rate, increasing the required minimum monthly payment, imposing or increasing an annual fee, and changing fees for cash advances, late payments, and over-the-limit situations.
- This advance notice must also advise the cardholder, that in most cases, he or she can reject the changes, and that the account may be deactivated thereafter.
However, with added protections, consumers should also be aware of the following changes:
- Banks that invent new fees are only required to disclose them before they are imposed;
- No additional notice is required when a low-rate offer or zero-percent rate financing offer is about to expire, as long as the new higher rate was originally disclosed to the consumer;
- No additional notice is required when the interest rate on a variable-rate account is raised, if the change triggered by a change in the index used as a basis of setting the rate;
- No advance notice is required when a credit card issuer lowers a consumer's credit limit (in most instances).
Although primarily designed to apply to credit card accounts, some provisions of the new law are also applicable to open end credit plans such as home-equity lines of credit.
The next phase of changes to the law takes effect on February 22, 2010. Those provisions are related to interest rate increases, over-the-limit transactions, student credit cards, and other matters.