Watch Out! Here’s what’s not covered by the CARD Act


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

By Consumers Union on Wednesday, January 27th, 2010

Although this law is a great step in the right direction, there are some practices that consumer will have to continue watching out for after the February 22nd effective date.

There is no cap on fees or the interest rate charged by issuers, although penalty fees must be reasonable and proportional to the cost to the issuer starting in August under the new law.

Consumers will not have to worry about further rate increases on existing balances but must continue to read all notices from their card companies because issuers can raise rates any time for any reason on future purchases after the first year a card is opened. They will have to give 45 days notice before they apply a new rate to future purchases, but the new rate will apply to all purchases made 14 days after the notice is sent out. So consumers must read their mail and stop using that card after 14 days if they don’t want the new rate to apply to their purchases.

There are no restrictions on the types of fees they can charge. Issuers have been coming up with all kinds of new charges, including dormancy fees, fees to receive a paper statement, annual fees etc. This is another reason why even consumers who do not carry a balance need to read everything that comes in the mail from their card company. If your company starts charging you a $100/year to use their card you may want to shop around before being surprised by a new charge.

Variable rates are very common—most all consumers are now subject to the ups and downs of an index. Indexes are generally low today, but will likely go up in the future and when they do, these increases can be applied to existing balances.

Though issuers are required to notify consumers at least 45 days before making significant changes to their account, there are two important exceptions to this rule. An issuer can close your account or lower your limit without giving you notice. If that happens, give the company a call and ask for an explanation. These changes can have an affect on your credit score, so the best thing to do if this happens is pay down your balances on the affected card as well as other forms of credit as quickly as possible.

Retailers will continue to offer deferred interest plans. These promotions tout no interest purchases, but beware, if you don’t pay the whole balance off in the allotted time, you can be charged interest all the way back to the time of the purchase.

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