phase of federal law restricting credit card fees, interest rates begins

[ProSense]

Final phase of federal law restricting credit card fees, interest rates begins

By Ylan Q. Mui
Washington Post Staff Writer

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Limiting penalty fees

The law required the Federal Reserve to write regulations outlining how much credit card companies can hit you with for things such as late payments or over-the-limit purchases. The new rules ban them from charging fees that are larger than the infraction. For example, if you are late on a $20 payment, your penalty fee cannot be more than $20. Or, let's say you spend $5 more than your max. The charge for that cannot be more than $5.

Banning certain fees

Issuers will no longer be able to charge you an inactivity fee for not using your card. They also can only charge you one fee per infraction. So if you make one late payment, they can you only ding you once.

Containing rate increases

If a credit card company raises your interest rate, it will have to tell you why. In addition, if your rate increases, the issuer must reevaluate it every six months. If you deserve to have it lowered, the card company must comply within 45 days of the evaluation. Previously, if a credit card company hiked your rate, there was no obligation to look at it again.

Protecting gift cards

The law also established new protections for store gift cards, which can only be redeemed at one retailer, and prepaid gift cards, which may be used at many locations. All gift cards sold starting Sunday must be good for at least five years. In fact, even if you have a gift card and it has an expiration date on it sooner than that, any unspent money left on the card must be honored for at least five years. You can request a replacement for any expired gift card for free.

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[vaberella]

1. My credit companies have already done that and all have lowered or maintained my rate.

I have no credit card over an 11% APR.

[jimlup]

2. Several of my Cards went to the ceiling about a year ago...

I assume they have no obligation to re-evaluate?

[Milo_Bloom]

4. Keep in mind, they are NO objective standards.

They can review anytime you ask them; however, they don't have to do anything.

All they have to supply is a reason for saying no.

[Milo_Bloom]

3. And the new rules have already been rendered useless...

Limiting penalty fees... Banks can still raise your interest rate due to a late charge and then only have to supply "a reason" for keeping your rate high after 6 months.

Banning certain fees... However, they can charge you a membership fee and WAIVE that fee for activity. They can also tie your APR to use.. (use the card 5 times a year and your APR will go down to X).

Containing rate increases... Actually, this is nothing new.. you ALWAYS had the right to a review.. the difference now is that they HAVE TO review it after 6 months, BUT... they can make up ANY REASON to keep your interest rate higher. There is no objective test for what constitutes a risk.



Basically the only thing worth anything in here is the "gift cards", which will now come with an upfront fee... oh you would like a $200 gift card? That will be $220 please.


This particular bill set the tone for this administration and the litany of useless legislation to follow.

[ProSense]

5. Nothing ever works.

We're doomed.

When a bank can't charge you $30 for a $5 payment it huge, no matter what you say.


"Banning certain fees... However..."

However? What the hell does membership fees have to do with inactivity fees?

[Milo_Bloom]

6. Huge? LOL

Forgetting the fact that the bank can set the minimum monthly payment ABOVE $5.00, so they can control what the minimum fee will be, just by changing the minimum monthly payment (most banks have already done this, so your HUGE thing is basically gone now)... let's remember that they can jack your interest rate as soon as the payment is late and then have no obligation to change it back, since there is no objective criteria.

Inactivity fees have BECOME membership fees. You might want to check your cardmember agreements, especially for cards that had inactivity fees.. you will find now that your card has a membership fee... the difference is that the membership fee is "waived" with activity. So.. no more "inactivity fee", but you will still have to pay a fee if you don't have activity. Imagine that.

And no, when you leave gaping wide loopholes in legislation... it will never work.

[ProSense]

7. "Forgetting the fact that the bank can set the minimum monthly payment ABOVE"

And that has no impact on the fact that the late payment cannot exceed the amount due.

[Milo_Bloom]

8. Ummm, actually, it does.

The minimum payment IS the amount due.

Unless by huge you are talking about the dozen or so people each year who have balances on their cards under $25.00?

[ProSense]

9. Tell it to

the President:

Last year, I signed the Credit Card Accountability, Responsibility and Disclosure Act into law] to put a stop to deceptive credit card practices and hold credit card companies accountable to their customers. Yesterday, the final reform provisions of the CARD Act took effect. As of today, consumers will be protected against unreasonable fees and penalties for late payments, as well as unfair practices involving gift cards. This law will also make the terms of credit cards more understandable and puts a stop to hidden over-the-limit fees and other practices designed to trap consumers. It restricts rate increases that apply retroactively to old balances. And the CARD Act prevents companies from increasing rates within the first year an account is opened.

In addition, the Wall Street Reform and Consumer Protection Act I signed into law last month will empower a new Consumer Financial Protection Bureau with just one job: looking out for consumers in our financial system. This includes making sure that credit card reforms are implemented forcefully and that big banks and lenders are living up to their responsibilities under the law. And in the wake of a terrible recession, these reforms and this independent consumer watchdog will not only protect consumers, they’ll strengthen our economy as a whole, leveling the playing field for responsible lenders and ensuring that families and small business owners are better able to make financial decisions that work for them.

Bogus arguments aren't going to change much.

[Milo_Bloom]

12. A politician exaggerated the effects of legislation?!?!?!

I didn't think it was possible!!!!

By all means.. take the politicians word for it... hope reality doesn't suck too much for ya.

[ProSense]

10. More from Consumer Reports

More information about why your rate is going up: Since August 2009, card issuers have been required to give 45 days notice before raising your interest rate on future purchases. Now they must notify you of the reason they are imposing a rate hike, such as market conditions or a reduced credit score.

Interest rate increases must be re-evaluated: Interest rate increases dating back to January 1, 2009 and into the future must be periodically re-evaluated. When a card issuer raises your interest rate, it must review the increase every 6 months and reduce the rate in certain circumstances.

link

[Milo_Bloom]

13. Nothing new here.

They have ALWAYS notified you of the REASON for rate hikes. It comes in the form of a letter that states they relied upon information in your credit report and that you have the right to dispute the information in that report and have them re-evaluate it.

They have also ALWAYS supplied a reason for why they won't reduce your rate.

The law has NO OBJECTIVE criteria for under what circumstances a bank MUST return your interest rate to its previous level. It's all subjective and thus, ANY REASON will do.

But, I guess if you can't TRUST the credit card companies... who can you trust?

[AtomicKitten]

11. I particularly like the provision that prohibits raising interest rates on past balances. nt

[Milo_Bloom]

14. Not exactly.

There are a whole host of circumstances under which they can raise your rate. (such as havving you set to a VARIABLE APR) Many card companies have already taken steps to make sure most of their accounts are now variable. They can also raise your rate on a single late payment or ANY OTHER breach of terms. Many of the card companies have updated their terms in the last year to make sure they have many MANY circumstances under which they can raise your rate.

[Hekate]

15. Hallelujah. This is a great improvement. I recc'd, but it's still zero.

What the hell is wrong with some people that they can't acknowledge a ray of light?