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New Credit Card Rules

Recently, new rules adopted by the Office of Thrift Supervision will help protect consumers from certain abusive credit card lending practices that can result in excessive fees and interest rate charges. The rules were developed in conjunction with the Federal Reserve Board and National Credit Union Administration.
 
What Are The Changes?
 
According to Demos, a public policy research organization, the recently issued rules will ban some of the bait-and-switch tactics in credit card lending. The new rules will:

Prohibit banks from retroactively increasing the interest rate their customers must pay on existing balances

Prohibit banks from allocating payments to lower-rate balances first to maximize finance charges

Ban the practice of “double-cycle billing,” which calculates interest over more than one month, and can result in higher finance charges

Eliminate upfront fees on so-called fee harvesting credit cards when they eat up the majority of the available balance on the cards

Require banks to provide consumers a reasonable amount of time to make payments

What Prompted These Changes?
 
The new regulations were finalized after the Federal Reserve Board received a flood of comments from approximately 66,000 people during a consumer testing study. Also, during this struggling economy, many banks have been lowering credit limits and raising interest rates to compensate for the losses from the mortgage crisis. Demos reports that these tactics are causing more borrowers to carry higher balances for longer periods of time and run the risk of exceeding the credit limits.
 
When Do These Changes Take Effect?
 
These rules will not officially take effect until July 1, 2010. However, the Office of Thrift Supervision encourages institutions to make their best efforts to conform as soon as possible, particularly to the provisions related to high-fee cards.
 
What Still Needs To Be Done?
 
While the new rules will provide important new protections, more safeguards may be needed to address other lending practices that can make it difficult for consumers to manage their credit. According to the Consumers Union, other reforms needed to address some of the abusive practices that hurt consumers are:

Limiting the amount of “penalty” interest rates, and how long card companies can keep you at these extremely high rates.

Prohibiting fees for paying a credit card by phone or internet.

Prohibiting account-opening fees no more than 10 percent of the credit limit.

Banning multiple over-limit fees during a single billing cycle.

How Do These New Rules Affect Me?
 
These new rules are a positive step in the right direction for consumers. Once you complete your debt settlement program, these regulations may help you make a fresh start as you strive to rebuild your credit rating. Keep in mind that it will still benefit you to practice prudent credit card use. Avoid additional interest and fees by only charging what you can afford to pay in full that month. Timely credit card payments may slowly improve your credit score.

About the Author

Bill Loughborough is Founder and President of Credit Answers, one of the best debt settlement companies in America. Credit Answers specializes in debt management, credit card debt settlement, debt negotiation and avoiding bankruptcy. Credit Answers team of experts work to enable a new and fresh financial start for individuals with debt problems. We realize the importance of money in people’s lives and also the accompanied strain that debt can cause. Our team has helped thousands of clients across the nation.

Bill started Credit Answers in 2006 and has built it into one of the leading debt settlement / debt relief companies in the U.S. At Credit Answers we encourage our customers to Live Better Debt Free.

For More information please visit: www.creditanswers.com

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