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Credit Card Holders "Bill of Rights"

By (Richard Linderman)

On May 20, 2009, Congress passed a credit card holders' "Bill of Rights" that will enact sweeping new restrictions on the credit card industry and provide numerous protections for consumers. Treasury Secretary Timothy Geithner said that the bill would "create a more fair, transparent and simple consumer credit market." This bill comes as no small relief to consumers and home owners battered by the current economic crisis.  When a condominium unit owner is faced with the decision of paying his maintenance fees or dealing with credit card balances that have rocketed skyward due to penalties and late charges, this bill provides a respite in the storm. President Barack Obama is expected to sign the bill into law within days. The bill was designed to combat abuses that Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, identified as, "Card issuers raise rates for unclear reasons, use billing methods that consumers do not understand, and assign fees and charges without warning.'
 
According to Consumers Union, publisher of Consumer Reports, what follows is a list of some of the key provisions of the bill:

Enhanced disclosure requirements
 

• Periodic statements must clearly state the required due date and late payment penalty.
• Credit Card issuers must disclose the period of time and total interest it will take to pay off a card balance if only minimum monthly payments are made.
• Credit Card issuers must provide 45-day written notice before raising APR or before making any other significant change to the card agreement.

First twelve months of new card
Credit Card issuers are restricted from raising interest rates in the first twelve months after a credit card account is opened, except:

• When the increase is under a variable interest rate agreement.
• At the end of the promised time period for a promotional rate. For example, the Credit Card issuer can offer 5 percent for eight months and then 12 percent after that. (The promotional period must be at least six months.)
• If the required minimum payment is not received within 60 days after the due date.

Existing balances
Credit Card issuers cannot raise interest rates on existing balances unless:
 

• The increase is under a variable interest rate.
• It is the end of a promised time period for a promotional rate.
• The required minimum payment is not received within 60 days after the due date.

Notice of future rate hikes
After the first twelve months, the Credit Card issuer can only raise the rate on future purchases upon providing 45 days notice of the increase. No notice is required for increases due to one of the reasons stated above.
 

Paying off under old terms
Credit Card issuers can't change the terms for repaying a balance, except that the Credit Card issuer may give the cardholder either five (5) years to pay off the outstanding balance at the old rate; or an increased minimum payment that has no more than twice as much of a contribution to paying down the balance as the old minimum payment.
 

Limits on fees and penalties
 

• If the interest rate is increased because the minimum payment is not received within 60 days after the due date, the rate must go back to the original lower rate if the consumer makes on-time minimum payments for six months.
• An over-the-limit fee may be imposed only once per billing cycle if the balance is above the limit on the last day of the cycle.
• Credit Card issuers who increases the interest rate must review the account every six months and decrease the rate if indicated by the review.
• Two-cycle billing is prohibited. Credit Card issuers cannot reach back to an earlier billing cycle when calculating the amount of interest charged in the current cycle.

These new restrictions and protections are expected to dramatically change the way Credit Card issuers treat consumers. These changes should create an environment wherein consumers can better understand and interact with Credit Card issuers.

Full post as published by New Jersey Law Blog on May 28, 2009 (boomark / email).