The Credit CARD Act of 2009 goes into effect TODAY, February 22, 2010.
- What does it mean for New Yorkers like you and me?
- Will it really help us?
- Is there anything we have to watch out for?
The answers: More protections. Yes, to some extent. And yes, there are things to watch out for.
In a nutshell, the Credit CARD Act is intended to require more transparency from credit card companies and prevent them from using tricks to increase interest rates and fees on consumers. The new law should help. But as expected, credit card companies have spent a lot of creative energy devising new ways to gouge consumers.
Here’s a summary of key things you should be aware of as well as the loopholes (based in part on a wonderful “Color of Money” column by Michelle Singletary of The Washington Post):
1. Credit card issuers are not permitted to increase the interest rate on an existing balance. However, this restriction doesn’t apply if you have a variable indexed interest rate or if you have a promotional interest rate that’s set to expire.
2. Issuers are not permitted to charge “over-the-limit” fees unless the owner of the credit card “opts in” and pre-approves such charges. The problem? According to Singletary, credit card companies are pressuring customers on the phone to approve such fees with the argument that if you don’t, there might be a purchase you can’t make because the limit is in place. There’s just something a bit two-faced about imposing a limit but then encouraging you to go over it. Best to follow Nancy Reagan’s advice if this happens and just say no.
3. Fees (e.g., annual fee, application fee) cannot add up to more than 25% of the initial credit limit. However, this does not apply to penalty fees.
4. You have the right to “earn back” a lower rate if you’re 60 days late and incur a penalty rate. However, credit card companies are not known for being softies, and there’s nothing that says they can’t come up with clever ways to make this process difficult for you.
For more information about the new Credit CARD Act, you can also go to the Federal Reserve’s page “What You Need to Know: New Credit Card Rules.”
For more New York debt and bankruptcy information, and for help dealing with credit card companies in New York and elsewhere, please contact me for a free initial consultation and I’ll share the benefit of my 30 years of New York debt negotiation and bankruptcy experience to help you navigate the process and get the full benefit and protection of the bankruptcy laws if you need them.
Contact Bruce Weiner, Esq.
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