Will New Consumer Protection Laws Save Me Money?

Written by , October 26, 2010

As you may know, a new credit card consumer protection law came into effect in 2010. The concept behind the law – known as the Credit CARD Act of 2009 (it was signed into law in 2009, but became effective in 2010) was to prevent banks and credit card companies from using certain business practices, and assessing certain charges, which Congress believed were keeping borrowers in debt for longer periods of time.

The new law has a number of different provisions that may change how you do business with your credit card company, and may end up saving you money. Here is some information and advice about the Credit CARD Act of 2009.

Service Fees

  • The new law limits some of the fees that your credit card company is able to charge you. For example, unless you give your credit card company permission to allow charges that go over your credit limit, you cannot be charged a fee when you do go over. Furthermore, if you do authorize your company to let you incur charges over your credit limit, over-the-limit charges on your account, then any fees can only be charged for up to three billing cycles.
  • For “subprime” credit cards (used by individuals with extremely low credit limits – often used by people who are in the process of rebuilding a damaged credit rating), companies now cap the activation and first year’s annual fees at 25% of the card’s credit limit.
  • Interest Rates

  • The new law requires that your credit card company give you at least 45 days notice prior to increasing your interest rate. While this new requirement won’t necessarily save you money directly, it does give you the opportunity to move your business to a new credit card to save yourself some money. In addition, the law gives you the right to cancel your card and pay off your existing balance at your old rate and repayment schedule if you don’t agree to your new interest rate.
  • Furthermore, your credit card company is prohibited from retroactively raising your interest rate under a “universal default” situation. (“Universal default” is a situation where a person is late on a payment to a different credit card account or mortgage or utility bill, and other creditors raise their interest rates, even if the person has never made a late payment to those other creditors.) The credit card company can raise your rates going forward (as long a you receive the required notice), but cannot raise the rate on your existing balance.

  • If your credit card company does increase your rates, and you pay your bill on time for six months in a row, then the company must lower your rate back to the original level.

  • Notifications

  • One of the main focuses of the law is to make it easier for individuals to understand what they’re agreeing to with their credit card companies. Companies now need to make their agreements easily accessible on their websites, and must refrain from using certain confusing terms in their agreements and literature.
  • Perhaps more important to many consumers, credit card companies must print on their statements how long it will take to pay off their debt if the customer pays the minimum payment only, and how much the customer would need to pay each month in order to pay of their entire debt in three years.
  • With the implementation of the Credit CARD Act you will be able to save some money and be more aware of credit card fees and charges.

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