The new credit rules came into effect on September 1st, 2010. Here are the highlights of the new law:
More time to pay monthly bills: Issuers have to give card account holders "a reasonable amount of time" to make payments on monthly bills. That means payments are due at least 21 days after they are mailed or delivered.
Limited interest rate hikes: Interest rate hikes on existing balances are allowed only under limited conditions, such as when a promotional rate ends, there is a variable rate or if the cardholder makes a late payment. Interest rates on new transactions can increase only after the first year. Significant changes in terms on accounts cannot occur without 45 days' advance notice of the change.
Minimum payments: Credit card issuers must disclose to cardholders the consequences of making only minimum payments each month, namely how long it would take to pay off the entire balance if users only made the minimum monthly payment. Issuers must also provide information on how much users must pay each month if they want to pay off their balances in 36 months, including the amount of interest.
Late fee restrictions: Late fees are capped at $25 for occassional late payments; however, the fees can be higher if cardholders are late more than once in a six-month period.
Gift cards: Gift cards cannot expire sooner than five years after they are issued. Dormancy fees can only be charged if the card is unused for 12 months or more. Issuers can charge only one fee per month, but there is no limit on the amount of the fee.
Limited universal default: "Universal default," the practice of raising interest rates on customers based on their payment records with other unrelated credit issuers (such as utility companies and other creditors), has ended for existing credit card balances. Card issuers are still allowed to use universal default on future credit card balances if they give at least 45 days' advance notice of the change.
The right to opt out: Consumers now have the right to opt out of -- or reject -- certain significant changes in terms on their accounts. Opting out means cardholders agree to close their accounts and pay off the balance under the old terms. They have at least five years to pay the balance.
Limited credit to young adults: Credit card issuers are banned from issuing credit cards to anyone under 21, unless they have adult co-signers on the accounts or can show proof they have enough income to repay the card debt. Credit card companies must stay at least 1,000 feet from college campuses if they are offering free pizza or other gifts to entice students to apply for credit cards.
Clearer due dates and times: Credit card issuers are no longer able to set early morning or other arbitrary deadlines for payments. Cut off times set before 5 p.m. on the payment due dates are illegal under the new credit card law. Payments due at those times or on weekends, holidays or when the card issuer is closed for business are not subject to late fees.
Highest interest balances paid first:When consumers have accounts that carry different interest rates for different types of purchases (i.e., cash advances, regular purchases, balance transfers or ATM withdrawals), payments in excess of the minimum amount due must go to balances with higher interest rates first. Common practice in the industry had been to apply all amounts over the minimum monthly payments to the lowest-interest balances first -- thus extending the time it takes to pay off higher-interest rate balances.
Limits on over-limit fees: Consumers must "opt in" to over-limit fees. Those who opt out would have their transactions rejected if they exceed their credit limits, thus avoiding over-limit fees. Fees cannot exceed the amount of overspeding. For example, going $20 over the limit cannot have a fee of more than $20.
No more double-cycle billing: Finance charges on outstanding credit card balances must now be computed based on purchases made in the current cycle rather than going back to the previous billing cycle to calculate interest charges. So-called two-cycle or double-cycle billing hurts consumers who pay off their balances, because they are hit with finance charges from the previous cycle even though they have paid the bill in full.
Subprime credit cards for people with bad credit: People who get subprime credit cards and are charged account-opening fees that eat up their available balances get some relief under the new credit card law. These upfront fees cannot exceed 25 percent of the available credit limit in the first year of the card. Instead of charging high upfront fees, some issuers are considering high interest rates on these high credit risk accounts.
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