Boston Bankruptcy – The New Credit Card Laws
February 15, 2010
By Boston Bankruptcy Attorney Kara O’Donnell, Esq.
In 2009, the Obama administration realized that unless the credit card companies were somehow reeled in, consumers would continue to be taken advantage of and, possibly, never get out of debt. The result? The Credit Card Accountability Responsibility and Disclosure Act of 2009 (also known as the CARD Act.)
Effective February 22, 2010:
- Credit card issuers will not be able to increase interest rates on existing credit card balances unless the borrower is at least 60 days late on the account. This will eliminate the retroactive rate increases and the universal default clause where credit card issuers would periodically review an account holder’s current credit standing to determine changes in terms and annual percentage rates.
- Credit card issuers will have to provide clear disclosure of account terms before a borrower opens an account. If the account provides a promotional interest rate period, the promotional interest rate will have to last a minimum of six months.
- Credit card issuers will not be able to raise interest rates on new credit card accounts during the first year the account is opened. This rule will not apply if the borrower falls 60 days late on a credit card payment.
- Credit card issuers will not be able to charge over-limit fees unless they obtain the account holder’s consent to accept and process over-limit transactions beforehand. If consent is obtained, the card issuer will not be able to charge more than one over-limit fee per billing cycle. Additionally, credit card issuers will not be able to charge an over-limit fee if interest charges or other fees are the sole reason for pushing the account holder over their limit.
- Credit card issuers will not be able to charge additional payment penalties for accepting payments by mail, phone, electronic transfer, or any other means, unless the payment is processed through an expedited service processor.
- Credit card issuers will face significant hurdles if they try to issue credit cards to consumers under age 21 without an “of-age” co-signer, unless they meet sufficient income requirements to independently repay the debt.
- If a due date falls on a weekend or holiday, the credit card issuer will not be able to penalize mailed payments that are received on the next business day. Payments received by 5 p.m. must be credited the same day.
- Double-cycle billing, a process where credit card issuers use the previous month’s balance to calculate interest charges for the current month, becomes illegal.
- Credit card issuers will be required to apply any payment above the minimum amount due to the highest interest balance first.
- Subprime or “fee harvester” credit cards will have fee limits. Fees on a credit card (other than late fees, over-limit fees, or insufficient funds charges) will not be able to exceed more than 25 percent of the credit limit when the account is opened.
- Credit card issuers will have to include a minimum payment disclosure that explains how long it will take to pay off the existing balance and the total cost in interest fees if the cardholder paid only the minimum amount due. Additionally, card issuers will have to provide minimum payment details and the total cost in interest to pay off the existing balance within 3 years (36 months).
- Card issuers will have to make account terms and cardholder agreements available to their cardholders on the Internet.
WHAT THIS ALL MEANS TO THE AVERAGE CARDHOLDER:
The days of the credit card companies being in TOTAL control are GONE. However, don’t be fooled. If you are a person who charges frequently and only pays minimum monthly payments, the only difference is that the number of years/DECADES it will take to pay off your debt will be indicated right on your bill. Under 21 card applicants will need a co-signer. (Gone are the days of on-campus credit card kiosks where they solicited to student WITHOUT JOBS.) Also, you will not be charged more than one over-the limit fee per month, and this seems to only be allowed on purchases you made and not because your account went over the limit last month due to interest or other fees.
Sure, the consumer receives additional protection from the CARD Act. However, if you are one of the many “only pay the minimum every month” or you are charging necessities every month (groceries, utilities, cash advances) then NOW is the time to take a second look at your overall financial health.
If you are a person who sees no way out of your credit card problems, a Chapter 7 bankruptcy might be right for you. Call Massachusetts Bankruptcy Attorney Kara O’Donnell for a free consultation at (857)526-1355.
Kara O’Donnell, Esq.
O’DONNELL LAW OFFICES (857)526-1355
Posted by Kara O’Donnell