New Credit Card Law 2010: Credit Card Act of 2009

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I hope everyone is aware of the new credit card law that will take into effect on February 22, 2010 in the United States. The date was moved up six months earlier from the original effective date of August 2010 because lawmakers sensed credit card companies were enforcing new strategies before they become restricted by the new law. Credit card companies are no dummies. They know the new law will restrict their ability to do many things such as interest rate increase so what did they do in late 2009? They hiked up people's interest rate for no reasons. No verbal or written explanation was given. Can you imagine an interest hike from 10.99% to 29.99%? Many people experienced similar shocks late last year when they found out their credit card companies raised their interest rates and reduced their credit limit. A friend of mine who had this happening to her threatened her credit card company with a complaint to the Better Business Bureau if they didn't lower her interest back to what it was before. They wouldn't so she wrote in to complain. She said she never made a late payment and always paid double the minimum payment. There was no justification for her rate increase. She paid off her balance and closed the account in January. Ben Pavone, an attorney from San Diego-CA, took a step further. He refused to pay Bank of America credit card until they reduce his interest rate. He threatens to sue the company if they ruin his credit.



The official title for the new law is Credit Card Accountability Responsibility and Disclosure Act of 2009, H.R. 627 of the 111th Congress of the United States or in short, The Credit Card Act of 2009. This reform, in my opinion is long overdue, and I am GLAD that it passed last year. Here are some of the highlights:

•Restrictions on rate increases. Except for introductory rates, there can be no rate changes for the first 12 months an account is open; after that, you’ll get notice of rate increases at least 45 days before the change. In addition, APRs can be increased on existing balances only if your minimum payment is 60 or more days late.
•New rules for payment allocation. If you have balances with different interest rates, any amount paid over the minimum payment will be applied first to balances with the highest rates, so you can pay down your balance quicker by paying more than the minimum payment.
•Overlimit fee opt-in. Unless you agree (“opt in”) to allow charges to go over your credit limit, companies will not be able to charge overlimit fees. This could save you money in fees, but be aware that if you’re too close to your credit limit and you attempt to use your card to make a purchase, your card may be denied.
•More consistent payment due dates. Payments will be due the same day every month, and you will have more time to pay — at least twenty-one days from the time your statement is mailed until the minimum payment is due.
•More information on your statement. You will be able to see how long it would take to pay off your balance — and the total cost to you (including interest and principal) — if you paid only the minimum payment each month. You’ll also receive notices about late fees or penalty rates (if they apply), and a toll-free phone number where you can get information about credit counseling, if you need it.
•Easier access to your credit card agreement. Credit card issuers will post representative samples of credit card agreements online. If you need to refer to your own credit card agreement, you will be able to request it online, and a copy will be mailed to you. Be sure to refer to your own credit card agreement when verifying terms of your account.

19 comments:

Willie a.k.a Reptoz said...

In my country, we talk about the credit card issue in America in our economic classes. It is no surprise to us why the banks in US are doing what they are doing now. In our place, getting a credit card is not easy. Only those with strong financial standing are allowed to have one. Lucky for us, the interest rate of CC is governed by our central bank. We are charged 17% for unpaid balance. But in your country? 29% interest is ridiculous. I hope things get better there.

Cheryl said...

Thanks for the "easy to understand" terms! My mind gets so "boggled" when I try to read all that fine print!

levian said...

i haven't been applying myself some credit cards yet. but fortunately they move the date half a year earlier n thus able to protect us consumers. :)

Rose Belle said...

@Willie - I think regulations that make it harder for consumers to apply for credit card is good because it protects them. I've watched a lot of debates on the news about the subject of easy credit availability and I believe banks that give consumers, who are already in huge financial debts, more credit whether in the form of loans or credit cards, will make a lot of money off interests on these folks because they will most likely pay the minimum payments on their accounts, pay late (late fees) and will most likely take a very long time to pay off their balance. The Central Bank of Malaysia charges 17% interest rate for credit cards? That's high considering people who have good credit in the U.S. get a decent average rate of 9%. Our 29.9% charged by some companies is the same as loan sharking.

Ebie said...

Hi Rose Belle, thanks for this info. I do not really read the fine print. Although I never had any sad experiences with my credit cards. The latest communication I got from one of the CC company was a reduction of my credit limit from $7k to $300.00, which was so funny. I had this card in the 90's but I hardly use it or even stopped using it. The inactivity did it!

Ryhen | Mind Power said...

29.99%??? Why that's absolute madness! What kind of interest rate is that? Oh well... tighter controls on the credit card companies means bad news for the consumers. I honestly thought the financial system is doing better now.

Gratitude said...

Gosh, the credit card issue juz made headlines in Malaysia over the weekend. Agree that it is absolute madness. Whoever digs into the credit pithole juz gets further into a dark trap.

I cut my cards 2 years ago.:)
+Ant+

Dorothy said...

What a lovely blog..so glad I found you.

Dorothy from grammology
grammology.com

Mei Teng said...

Credit card holders have to pay a tax of RM50 per card. New tax law introduced this year. Those who own more than one has to start cancelling those additional cards.

Rose Belle said...

@Ebie - That was a HUGE decrease from $7K to $300! BofA sent me the disclosure of the new credit card law, that was how I became aware of it.

@Ryhen - It's called legal loan sharking! 29.9% which is really 30% interest rate.

@Gratitude - I didn't know our credit card reforms would have made headlines in Malaysia. That's interesting...

@Dorothy - Thanks for visiting!

@Mei - RM50?? Wow and ouch! So I don't think many Malaysians more than one card, huh?

KN said...

I heard some rumblings about this new law awhile back. Good to hear that it will go into effect this month. I like the the due date changes which will make it easier for people to remember when their bills are due unlike now, the due date is different every month.

Debby said...

Excellent blog, nice mix of helpful, humorous and practical. Credit card wise? Best advice ever was that my father gave me. Don't buy anything you can't afford on the day you're buying it. And, if you must put it on a card, never miss paying in full. It still works for me. I blog with my three grown daughters who all live on their own now. (Yes, they really do grow up and move out!) They follow Grandpop's advice too and so far, so good.

Tatiana said...

Great points you made in this post Rose Belle, and the law will be a relieve for many, I guess. Here in Europe the laws are somewhat better, but once you get into the "circle" it's very difficult to pay all debts with the various credit cards...

Rose Belle said...

@KN - I like the due dates changes too. From now on, the due date will stay the same instead of different ones every month.

@Debby - Thanks for the kind compliment about my blog. Your dad definitely gave the best advice about credit card ownership.

@Tatiana - I think credit card debts is a universal problem. Owning various credit cards with high balances does make it harder to pay them off.

Nezzy said...

They just won't give us a break, will they?

Ya'll have a greatly blessed day!!!

Alice said...

Very informative post! Good to know about these changes. My available credit was reduced for all of my cards last year. I didn't think much about them. Glad we have new legislation to help working people.

marfmom said...

I heard a new law has been passed that allows credit card companies to charge you even if you don't use the card at all that month. Is that true?

Rose Belle said...

@Marfmom -

Some credit card providers do charge you a fee for not using your card. The best way to find out is to call your credit card company and verify if there is a non-usage fee which typically runs about $20.

foongpc said...

What?! 29.99% interest? OMG!! That's crazy! How greedy can the banks be?

I think credit cards is dangerous if you do not know how to control using them!