Mortgage Rate News

Image via Wikipedia

There has been a great deal of talk about changes to credit card rules. And many consumer groups think that it is about time. Many
of the practices that credit card issuers engage in seem rather predatory — especially since issuers can change terms on a whim, even for responsible customers. President Barack Obama has promised to tackle credit card companies, and the Federal Reserve has already passed new rules about credit cards. Even with all of this, the House is proposing new credit card rules. It looks like credit card issuers could be the next target of populist rage. Consumerism Commentary offers an in-depth look at the proposed changes to credit card regulation:

1. If the company decides to increase a consumer’s interest rate, the new interest rate would not apply to existing balances, only new activity. The consumer will have an opportunity to refuse the interest rate hike. The account would then be closed to new purchases and the consumer will have at least five years to pay off the existing balance at the old rate. In addition, the minimum payment cannot be more than doubled as a percentage of the balance. Assuming a credit card company would try to circumvent these changes by charging an additional fee, the bill would prevent the company from doing so.

2. The above limitation that prevents the new interest rate being applied to the prior balance disappears if the rate increase was due to an index linked to the interest rate, due to an expiration of a promotional rate, or due to a late customer payment.

3. Credit card companies would need to provide the consumer a notice at least 45 days in advance if they intend to increase the interest rate.

4. Double cycle billing often results in being charged new interest a month after your pay off your balance in full. This occurs because in most credit card agreements, the interest charged is based on the average daily balance over the past two billing periods. Under the terms of this bill, double cycle billing would be prohibited.

5. Every statement would include an amount and instructions for paying off the bill in full.

6. If a consumer can prove that he or she sent a payment seven days or more before the due date, the payment would be considered on time even if the credit card company received the payment after the due date.

7. Currently, if a borrower has two balances at different interest rates such as purchases and a cash advance, the credit card companies apply payments made to the lowest interest rate balance first. This maximizes the interest charged to the consumer. This bill would require creditors to apply the payment in one of two methods, both more favorable to the consumer.

8. In some cases, credit cards allow purchases that exceed the credit limit are allowed to be processed, and the company assesses an additional fee for exceeding the limit. Card companies see this as a service to customers, to ensure important payments will be approved. This bill would give consumers the choice to opt out of this benefit, requiring the credit card company to decline the purchase.

Of course, these still have to be accepted by the House, the Senate still needs to put together a version, and they need to be signed by the President. But it looks like, in any case, now may be the time for true credit card reform.