july 10, 2009 08:28am

HR 627-2

What does the new credit card law mean for consumers?

At least on the surface, HR 627 appears to make many changes in the way credit card companies are able to deal with their customers. Among the important changes are:

- Limiting interest rate increases(limited to the end of promotional rates, variable rates and as penalty for late payment)

- Limiting the conditions for charging “over-limit” fees

- Giving consumers more time to pay their monthly bill and changing the terms by which a payment can be deemed “late”(payments that arrive on days when the creditors are closed can no longer be considered late).

- Eliminating the practice of “universal default” where a creditor can penalize you for issues unrelated to their accounts. For example, a client may no longer have their interest rate increase by one creditor because they are having trouble with another. This does not apply for multiple accounts with one company.
- Creditors must also provide more information to their customers about their minimum payments, including both “How long an account will take to be paid in full at the minimum”, as well as “How high would he payment need to be to satisfy the balance in 36 months”. This is an important provision for those considering help with managing their debts, as it will show precisely what they’re up against if by paying on their own.
To know for certain how many these changes will be practical and how many will be strictly “on paper”, we’ll have to wait until the law takes effect. For example, in the case of over-limit fees, a client must be notified if they are going to charge an amount that would exceed their credit limit and given the choice to “opt in” and pay the penalty. However, most accounts that are in “Over-limit” status are made so by fees and interest, which is not clearly addressed. As a whole, the law seems to address several longstanding complaints that struggling consumers have made, which in turn should make managing debt easier.

Posted By: financira