Credit Law Makes Major Changes
President Obama signed the Credit CARD Act of 2009 into law May 22, 2009 and ushered in a new era for consumers who use credit cards. Most of the provisions took effect on February 22, 2010 with the remaining provisions taking effect on August 22, 2010.
Summary of the major changes to credit law.
Late fee restrictions: Late fees are capped at $25 however if you are late more than once in any 6 month period fees can rise dramatically.
Highest interest balances paid first: Amounts in excess of the minimum payment must now be applied to higher interest balances. In the past credit card companies applied this amount to lower interest rate balances first which extends the time required to pay off higher-interest rate balances.
More time to pay bills: Consumers now have at least 21 days from the time bills are mailed or delivered to make the minimum payment.
Limits on over-limit fees: These fees cannot exceed the amount the cardholder exceeded his/her limit. Also cardholders must opt-in for these fees to take effect. Those who opt-out will have transactions that exceed the credit limit rejected.
Minimum payments: Credit card issuers must now disclose how long it would take to pay off balances if only the minimum payment is made.
The right to opt-out: Card holders have the right to opt-out of these changes and close their account. Any balances will have to paid off under old terms in 5 years. Keep in mind that closing an account in good standing can affect your credit score.
No more double-cycle billing: Finance charges must now be calculated based on current period outstanding balances not prior periods. In the past credit card holders who paid balances in full were penalized and charged finance charges even though monthly balances were paid in full.
Limited credit to young adults:
Credit card issuers are banned from issuing credit cards to anyone under the age of 21 without an adult co-signer or proof they have enough income to repay the debt. Credit card companies offering free pizza and t-shirts must stay at least 1000 feet from college campuses.