Credit Cards - Congress Helps the Consumer

By: Richard Stoyeck Click author's name for more of his/her articles

In August of 2009, new rules went in effect for credit cards. It is important that you are aware of them. The recently elected Democratic Congress forced the banks to agree to and accept these new regulations. They are a watered down version of what was originally proposed, and they do protect you the consumer, as opposed to the banks. This law would have never become a reality if the Republicans still controlled the Congress. Money is power in Washington and the banks have spent big money in an attempt to kill the new credit card act before it went into effect. This the Credit Card Act of 2009. The Congressional name is the Credit Card Accountability, Responsibility and Disclosure (CARD) Act.

Here are the key sections for credit cards:

1) Consumers must know be notified in writing regarding any and all changes which the banks want to implement to your account. This warning is to be made 45 days prior to the adjustments going into effect. Before the law passed the Congress, every bank had the responsibility to give you 15 days notice. Under the new law this does not apply to defaults however. If you default, interest-rate increases are in effect immediately, and the 15 day rule has no effect.

2) We have noticed that some credit card banks will send you a bill, payment seems like it is due immediately. The reason is that some banks intentionally want you to be late with your credit card payment. Their reasoning is that they can tag your account with the late fees which make banks billions of dollars every year. That's right, billions of dollars every year. For some banks, the late fee is their biggest source of profits. It also allows them to screw the consumer over. The new credit card law will impact the banks by forcing them to give you 21 days minimally, to make the payment. What this really means is no late fees for 21 days at the least.

3) The new credit card laws also give you the right to tell the banks no to interest-rate increases. Prior to the credit card act becoming law, each bank had the right, to give you an opt-out option. It was always the bank's right, not the consumer's right to offer you the opt-out, and very few of them did. Now you, the consumer have the right to cancel your account and then once cancelled, you can still pay off the balance under the old lower interest rates. This is a big deal. It means the banks cannot change the interest rate on your credit card by doubling it, and then force you to pay off the old balance under that higher interest rate. They did this all the time under the old laws. What you need to do is walk away from the high interest rates because you now have rights. You should pay off the old balances if you can, but you don't need to accept the bank's higher rates which they use to force upon you. This is great news for the consumer, and it's bad, even terrible news for the banks, who are the people that are responsible for the 2008 financial panic.

There are numerous parts to the credit card bill that won't be covered here. For an example, the act provides for limitations on interest rate increases. There are even bans on marketing, and especially marketing or issuing new credit cards to people under 21, which includes college students. The consumer really benefits beginning later on in February of 2010, when a whole assortment of new consumer oriented regulations on gift cards come into effect.

In July of 2010 The banks take get hit again when more new requirements will be put into effect. In 2010, there will be even more disclosure required regarding bank credit card fees and rates and terms that must be on all consumer credit card statements monthly. We will see new rules implemented on credit card applications, and mailers, and statement stuffers.

The Federal Reserve Board along with the Congress, as well as federal banking regulators forced the banks to give in to these new rules, and yes, the financial panic of 2008 did its part to credit card banking more consumer friendly.

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About The Author: For an expanded version of this article and other interesting articles Click Here. Richard Stoyeck's background includes being a limited partner at Bear Stearns, Senior VP at Lehman Brothers, Arthur Andersen, and KPMG. Educated at Pace University, NYU, & Harvard University, today he runs Rockefeller Capital Partners & StocksAtBottom.com