The end is near (to credit card tricks and traps that is…)


We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Consumers Union on Wednesday, August 19th, 2009

We’ve all been waiting patiently for the credit card reforms that were passed in May to go into effect, while the credit card companies jack our rates and lower our limits. Finally the first reforms are going into effect!

Starting August 20th, credit card companies must do the following:

1. No more gotcha late fees because the bill was received too late to get the payment in on time. A payment cannot be treated as late unless the bill is sent at least 21 days before the payment due date.

2. More notice when the terms of the card get worse. Card companies must provide 45 days advance written notice to the consumer of significant changes to the credit card account.

The Federal Reserve Board was given the task of detailing exactly what changes constitute “significant changes” and require this new notice.

The card company must notify you 45 days in advance if they change the:

  • Annual Percentage Rate. (They must notify you if they increase or change it from fixed to variable, but they don’t have to notify you if they decrease the APR.)
  • Fee increases
  • Minimum payment requirement (see note 1 below.)
  • A reduction in or loss of the grace period.
  • The method for computing the balance.
  • Changes between a fixed and a variable interest rate.

There are a few exceptions. They do not have to notify you if:

  • They reduce your APR
  • The APR expires pursuant to a previously specified expiration date
  • Your account is suspended or terminated
  • They lower your credit limit (45 day notice IS required if they want to impose an overlimit fee or penalty rate for exceeding the lower limit.)
  • A variable rate changes

3. The right to avoid the adverse change by rejecting the new term.

NOTE 1: there is no right to reject a minimum payment increase.

NOTE 2: If you reject, the bank can cancel the card and make you pay if off under your old terms, but with a higher minimum payment. Your new payment could be double your old minimum payment, or higher if needed to pay off the card in five years.

Although the end may be near, consumers have been subject to unscrupulous credit card practices for decades, and we’ve still got a few months until we are fully protected. We shouldn’t have had to wait so long. Tell Congress that we need a Consumer Financial Protection Agency to stop dangerous financial practices before they take over the marketplace!

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