Consumer Law

Creditors Find Ways Around New Credit Card Rules

By M. Stan Herring

Our friend Denise Richardson, of givemebackmycredit.com, has posted an article about new regulations placed on credit card companies. However, creditors aren't willing to back down so easily and are finding creative ways to bypass losses of revenue that the new rules, that came into effect on February 22 of this year, might cause.

The new regulations include:

Unfair rate increases and the universal default clause have been eliminated. This means that if you are late on one bill, a different creditor cannot use that to justify an increase in your interest rate. It also means that creditors cannot hike up the interest rate on a whim.

Limits on credit issued to the under-21 crowd are now in effect. This one protects college kids -those most sought after by creditors, from getting heavily into debt before the truly understand the repercussions and how the credit industry operates.

Fee calculations are more structured eliminating inconsistent payment cycles, over-the-limit charges without the consumer's consent, and extra interest charges due to pesky double-cycle billing practices.

Favorable interest rates must stay in effect for new credit cards for at least 12 months unless they have been issued as a promotional rate. In that case, they must stay in effect for 6 full months unless the consumer has been 60 days or more late with his payment.

Creditors are now required to use understandable language in all documentation and fine print including applications, billing, and notices. Statements must show how long it will take to pay off the debt incurred if the consumer only makes the minimum payment due.

Any changes to a consumer's credit card account cannot take place until he has been given at least 45 days notice.

To replace lost revenue because of the above revisions, many credit card companies are going to start charging $1 for paper credit card statements. To avoid this, you have to sign up for electronic statements. Creditors are also adding on "inactivity fees," increasing annual fees and reducing rewards or requiring card holders to request rewards that used to come automatically and placing expiration dates on rewards.

Creditors can also request that their customers agree to over-the-limit charges. This means consumers can exceed their monthly limit and if consumers don't read the fine print and don't pay attention, they can agree to this without realizing it. Credit cards with variable interest rates instead of fixed rates allow the creditor to raise the interest rate every time the primary rate goes up.

To protect yourself from any unwanted credit card surprises, be sure to read all documentation (including the fine print) the credit card companies send to you. Also, you can shop around for the best interest rate and other reward incentives.

If you have credit questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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Full post as published by Alabama Consumer Blog on March 02, 2010 (boomark / email).