by Nancy Osborne, COO of ERATE®
Legislation passed last year by Congress, based on a set of guidelines set forth by the Federal Reserve, will take effect on February 22, 2010. The goal of the legislation is to better protect consumers from unscrupulous credit card lending practices by forcing the card issuers to provide improved disclosures and to abstain from some specific practices which adversely impact consumers. Many of the unfriendly “gotcha” practices which have caught consumers unaware will be coming to an end.
Overview of Changes:
Monthly card statements will be clearer in presenting policies and fees.
New cardholders will be protected from interest rate increases during the first 12 months of opening an account. Any increase to the rate after the first 12 months will only apply to new balances generated from month 13 on and not to the existing balance generated within the first year.
Credit card issuers must inform consumers 45 days prior to increasing their interest rate or making changes to annual fees and expenses, including cash advance fees.
Consumer's payments must first be applied to balances carrying the highest interest rate to insure that the most costly consumer debt is retired the fastest.
The practice known as the double-billing cycle (or the two-cycle average daily balance) has been banned. This practice adversely impacted those consumers who carried an inconsistent or varied balance from month-to-month.
Fees for exceeding a card's maximum limit will be curtailed. Consumers are required to consent to any fee increases in advance of raising their current card limit. Naturally a consumer's unwillingness to consent will likely result in a decline of the requested increase to their limit.
Consumers will have an additional 7 days notice to pay their bills, 21 days will be the minimum required time frame between the mailing date of the bill and bill's due date. This is an increase from the previous 14 day requirement.
Card payment due dates must fall on the same date every month.
Consumers are permitted to “opt out” of certain changes to their card agreement. However electing to opt out could change the terms of an existing card agreement forcing new terms to be reached.
Consumers under the age of 21 must now document their ability to make their credit card payments or provide a co-signer for the account.
Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.
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