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Here's why:

Credit Card Reform Long Overdue

Under the new rules millions of credit card users will avoid retroactive interest rate increases on existing balances, have more time to pay monthly bills, receive more notice of changes in card terms, and pay fewer penalty fees and late charges. Here’s a brief summary of the major changes.

Rate Hikes: The ability of card issuers to hike rates on existing balances will be limited. Also, rates on new advances can increase only after the first year and a 45-day advance notice of the change.

Universal Default: Issuers will not be able to increase interest rates based on "universal default," a practice of raising rates based on a cardholder’s payment record with other credit issuers. Some major card issuers have already voluntarily ended this practice.

Due Dates: Issuers will have to give cardholders "a reasonable amount of time" to make payments on monthly bills. This is interpreted to mean at least 21 days from the billing date. Many issuers have squeezed due dates down to impractical levels.

Time of Payments: Card issuers will no longer be able to set early morning or other arbitrary deadlines for payments on their due dates. The standard cutoff will be 5 p.m. Also, if an issuer does not accept mailed payments on weekends or holidays, those days cannot be considered in a late payment.

High Interest First: When people have more than one card with an issuer, the issuers can no longer apply payments to the lowest interest accounts first. Payment above the minimum required will have to go to the highest interest account first or be divided proportionately.

Over Limit Fees: Over limit fees will be prohibited if consumers exceed credit limits because of holds or blocks placed on transactions (temporarily adding a deposit amount is common with charges at motels and on car rentals).

Double-Cycle Billing: Issuers will be limited to computing finance charges on transactions in the current billing cycle and will no longer be able to go back to the previous cycle. Double-cycle billing is a practice that catches consumers who pay off their balances in full in one month but not in the next.

These are the reforms that will affect most consumers. There will also be additional disclosure requirements but few people read those disclosures anyway. These are much needed and long overdue changes to end some very abusive practices. Unfortunately the new rules won’t take effect for another year and a half in July 2010.

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Anybody else excited to hear this news?

Date: 2009-01-12 11:34 pm (UTC)
From: [identity profile] verrucaria.livejournal.com
I hope c.c. companies don't start abusing their "rights" as much as possible before this law goes into effect...

But it is good news.

Date: 2009-01-12 11:37 pm (UTC)
From: [identity profile] villagecharm.livejournal.com
I was excited to hear this, particularly because even customers with great credit who always pay their bills on time have been abused by some of these practices. My only gripe is they won't take effect for 18 months. These are the kinds of things that could really help unfreeze some consumer credit now, when it's needed.

Date: 2009-01-13 02:10 am (UTC)
From: [identity profile] rapier.livejournal.com
Agreed. I wish it would happen sooner. With these laws in effect, I might be more willing to use credit cards. (Which, uh, actually ... is it tinfoil hat time yet? I wonder if these new rules will encourage otherwise credit card-phobic consumers [like me] to use them more, thus sucking more people into that trap?)

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