Consumer Law

Credit Cardholders? Bill of Rights Act of 2009 Signed into Law

By Jonathan Ginsberg

On May 22, 2009, President Obama signed into law the Credit Cardholder’s Bill of Rights Act of 2009.   The provisions of this new law go into effect in February, 2010.  A detailed explanation of the provisions of this new law may be found at Adam Levitin’s informative article on the CreditSlips.com blog.

In reviewing the legislation, it appears that many of the provisions are designed to eliminate many of the tactics used by credit card lenders to tack on fees or increase interest rates quickly and without notice.

I especially like the provision in the bill that allows consumers to opt out of “overlimit” credit.  In other words, if you have a credit limit of $10,000 on a card and you incur charges that bring your balance to $10,500, many credit lenders now will permit the transaction but then charge you an overlimit fee.  If you use the card again, you will get hit with another, then another overlimit fee.  If you were not aware that you had reached your credit limit you could find yourself with hundreds of dollars in overlimit fees but no knowledge about these fees until you received your bill.

Under the Credit Cardholders’ Bill of Rights you can opt out of access to overlimit credit, meaning that if you attempt to use your card when your credit limit has been reached your card will be declined.

If you do choose to keep overlimit availability, you could not be charged multiple over-limit fees in one billing cycle.

There are a number of other provisions that will be the subject of future blog posts, however….

do not assume that this “Bill of Rights” will stop credit card issuers from figuring out new and creative ways to extract money from you.  As Profession Levitin points out today’s overlimit charges will become tomorrow’s “high balance” charges, today’s high interest rates become tomorrow’s annual fees.

The bottom line: neither this law nor any other law will protect a consumer from misusing credit.  I encourage my bankruptcy clients to treat credit cards as if they were check cards, with money being deducted immediately from your checking account.  If you use credit cards as a source of extended credit you will end up paying more in interest charges than your total balance.

Full post as published by Credit Law Network on June 24, 2009 (boomark / email).