Sweeping act’s regulations omit business cards, charge cards, more

By Tony Mecia

Despite a sweeping credit card law that adds protections for consumers this month, card issuers will still largely remain free to set the terms of your account in crucial areas such as interest rates and fees.

As a result, consumer groups figure that complaints about card issuers are likely to continue even after the bulk of the law takes effect Feb. 22.

“A huge step has been made to protect consumers from the worst tricks and traps,” says Lauren Bowne, staff attorney with Consumers Union. “It is a significant first step, but it doesn’t fix everything.”

The law — the Credit CARD Act of 2009 — regulates how card issuers handle specific issues in areas including billing, disclosure, youth marketing and introductory offers. But companies are still free to hike interest rates on future purchases, impose all kinds of fees and close accounts or lower credit limits without warning. The restrictions apply only to consumer cards, not business cards.

Consumer groups are pushing for more regulation to address those issues. They’d like the federal government to create a powerful pro-consumer regulator. The U.S. House in December passed a bill that calls for such an agency, and the Obama administration supports it, but its future is uncertain in the Senate. Banks and business groups oppose the legislation.

Nessa Feddis, vice president and senior counsel of the American Bankers Association, says further restricting the flexibility of card issuers will hurt consumers because banks will simply refuse to offer them cards.

“Government price controls don’t work, and they end up harming the people they’re intended to help,” she says.

For a complete summary of the major areas left untouched by the new law please go to to Credit Card News.com

by Aleksandra Todorova
Tuesday, February 16, 2010

Unexpected rate hikes. Over-limit fees. Double-cycle billing. Those are just a few of the credit-card practices that have trapped millions of consumers into a life of constant worry over mounting debt. In less than a week, these practices will be history.

On Feb. 22, 2010, the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) takes effect. It puts forth new rules for credit-card issuers that are arguably the most consumer-protective in the history of credit cards.

If you’re the type of person who reads every piece of mail sent by your credit-card companies, then chances are you already have a fair idea of the changes coming. (Credit issuers have been mailing out change-of-terms notifications that explain the details in recent weeks.)

Then again, credit-card rules are hardly ever simple — and the CARD Act is no exception. Below are the key changes that the new law puts forth, along with some notable exceptions that could still allow consumers to get in trouble with their credit cards.

Finance Charges, Interest-Rate Hikes and Notifications

• No rate increases for the first 12 months after opening an account.
• Rate increases can only be applied to new charges.
• Annual and application fees cannot exceed 25% of your initial credit line.
• No more double-cycle billing.
• A six-month minimum promotional-rate period.
• No more over-limit fees, unless the card holder opts in.
• No fees to make credit-card payments online or over the phone, unless you make a payment on your due date.
• Must give 45-day notice of pending rate or fee hikes or any other significant changes to credit-card terms.

Exceptions, Caveats, Loopholes:

• Rate hikes are allowed if you’re more than 60 days late with a payment.
• Some banks have already found a way around the rate-hike issue, by increasing card users’ regular interest rates to as high as 29.9% and then refunding a part of that rate for each month that the customer pays on time.
• Double-cycle billing, although prohibited, can technically still exist for credit cards that don’t have grace periods.
• Issuers have been calling consumers asking them to opt in for over-limit fees in exchange for lowering that fee, says Chi Chi Wu, a staff attorney with the National Consumer Law Center, a consumer advocacy group. What they’re not saying is that if people don’t opt in, the transaction will be denied and they will not be charged over-limit fees in the first place, Wu says.

Billing Statements, Payments and Disclosures

• Billing statements must be sent 21 days before the due date.
• Your due date should be the same date each month.
• Payments are considered on time when received by 5 p.m. on the due date or the next business day after a holiday or weekend.
• Payments above the minimum must be applied to the highest-rate balance first.
• Each monthly statement must include information on how long it would take you to pay off your balance if you make minimum payments only and the total you’ll pay, including interest and principal; and how much you need to pay each month in order to pay off your balance in 36 months and the total you’ll pay, including interest and principal.
• Statements must also include a warning that by making only minimum payments you will pay more interest and it will take you longer to pay off your debt, as well as a toll-free number to call if you want to be referred to a credit-counseling service.

Exceptions, caveats, loopholes:

If you make a purchase under a “deferred-interest” plan (such as “No interest for six months,” for example), the company may let you choose to apply extra amounts to the deferred-interest balance. Otherwise, for two billing cycles before the end of the promotional period, your entire payment must be applied to that balance. Carrying a “deferred-interest” balance is a risky proposition altogether, says Wu: Unless the balance is paid in full over the specified period, the company will charge all interest retroactively once the promotional rate expires. “We think deferred-interest plans should have been banned,” Wu says.

You can read about more credit-card rule changes regarding college students and young adults at SmartMoney.com

5 Moves to Make Ahead of the New Credit Card Law

by Connie Prater
Tuesday, February 9, 2010

provided by

With new regulations starting in less than a month, you may need to take stock of your credit card portfolio to determine which cards’ terms are changing to your benefit and which feature changes that can hit you in the wallet.

The most important thing to do, says Lauren Bowne, staff attorney at San Francisco-based Consumers Union, is be aware of your card terms. So much has changed in recent months that consumers need to pay attention to what is and isn’t featured in the credit card.

“Even if you’re the person who pays off your balance and doesn’t even have any credit card debt,” says Bowne. “They might get a notice that says they’re getting a $100 annual fee. Even people with stellar credit and stellar credit payment histories need to pay attention.”

Here are five smart credit card moves to make before Feb. 22:

1. Consider waiting to get new credit cards until after Feb. 22 because new accounts are protected from interest rate increases for the first year. As issuers compete for new customers in the new reform law landscape, there may be good deals and offers for people with good credit.

2. For existing accounts, consider doing a balance transfer from higher interest rate cards to accounts with lower APRs. Some issuers are offering good customers balance transfers of at least a year. Remember that there is a cost of 3 percent or 4 percent of the amount transferred, so weigh that decision carefully. Also, take note of what the new interest rate will be AFTER the promotional period ends. If it’s higher than the rate on the old card or only a few points lower, it may not be worth it to switch.

3. Have a Plan B backup card or two. Issuers can still lower your credit limit and close your account without advance notice. Make sure you have more than one card as a backup in case this happens to you and you need a credit card for emergencies.

4. Charge a small amount on those other cards every other month and pay it off in full when the bill comes. This avoids any dormancy fee that may be assessed and may prevent the company from closing the account for inactivity. Some issuers require a minimum amount of charging to avoid inactivity fees, so check your terms.

5. Young adults’ access to credit will be restricted by the new law. For college students or anyone under 21 who is responsible with credit, the best move could be to get a credit card now while you still can on your own. After Feb. 22, you will have to get an adult (over 21) co-signer and may be asked to show proof you have the ability to pay.

Some Advice Doesn’t Change

In addition to the moves to make before the law takes effect, good credit card habits remain important, some of them even more so.

Don’t go overboard. Making too many changes within a short period — as in opening or closing several accounts at once — can hurt your credit score. If you’re closing or adding new accounts and about to apply for a loan, it may be better to keep the cards you currently have — even if the terms are worse. Closing an account that you’ve had for a long time can negatively impact the portion of your credit score related to credit utilization ratio.

Pay your bills on time. Even though the credit card law gives you a 60-day window for late payments before banks can impose penalty interest rates on existing balances, payments not received by the due date will show up as bad marks on your credit report.

Pay more than the minimum amount due. It will help you pay your credit card debt off faster. The new law mandates that your billing statement include a prominent notice of how long it will take you to pay off your debt. For many, that could be a wake-up call.

If you’re having trouble paying your bills, get help from an accredited nonprofit credit counselor. Your monthly credit card statement will feature a toll-free number to call for help. The credit card reform law requires that issuers prominently display a toll-free number that consumers can call to get the names of at least three consumer credit counseling agencies that have been approved by the U.S. bankruptcy courts for credit and debt management counseling.

Stay on top of your mail. The new law requires that credit card issuers notify you of changes to your account. That means you can’t leave that mail unopened on the table for a week. Some changes are likely to have deadlines and time elements that can hurt you financially if you don’t act quickly.

Bowne, from the consumer group, recommends consumers create a list of their credit card accounts that includes key terms (i.e., the interest rates for purchases, balance transfers and cash advances, fees, due dates and grace period). She recommends marking your calendar to remind yourself when promotional rates end so that you can be sure to pay off the balance before higher interest rates begin on those accounts.

“It requires a lot of organization and a lot of time,” Bowne says. “The more credit cards you have, the more things you’ve got to juggle and the more things you’ve got to know.”

She adds: “At least now, luckily, your credit card due date will be on the same day each month.”

1.  Don’t sign the back of your credit cards  –Instead, print ‘PHOTO ID REQUIRED.’

But here’s what is perhaps most important of all:

7.   Call the 3 national credit reporting organizations immediately to place a fraud alert on your name and also call the Social Security fraud line number.   The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.

4.) Social Security Administration (fraud line):    1-800-269-0271  

Here’s a credit card offer that should create some instant converts to Suze Orman’s new cash-only mantra: Subprime lender First Premier Bank is offering a credit card with a 79.9% interest rate.

• Bing: Credit card horror stories

A credit card analyst said it’s the highest rate he’s ever seen.

We suspect you’d likely get a better rate from Hesh, Tony Soprano’s old loan shark friend.

“The bloated APR is how First Premier Bank, a subprime credit card issuer, is skirting new regulations intended to curb abusive practices in the industry,” Candice Choi wrote at The Huffington Post. And you can expect similar tactics from other outfits that specialize in providing cards to people with poor credit scores.

Isn’t it funny (not the ha-ha kind) how reforms intended to protect consumers from credit card company abuses have instead led to higher interest rates and minimum payments and other changes to terms that are creating hardships for even the best customers?

That’s what happened here. The First Premier Bank subprime credit card — still available online — used to come with $256 in fees in the first year for a card with a $250 limit, Choi reported. New credit card rules in February will limit those fees to 25% of the card’s credit line. So First Premier lowered its fees in its new preapproved snail-mail offers to comply with the new law — but upped the interest rate on the card from 9.9% to that eye-popping 79.9%.

Read the Full Story at MSN Money