December 17 2008|02.00 AM UTC

David Tu

8 New Credit Card Reform Rules You Should Know

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The Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration will vote tomorrow on a set of new credit card regulation reform, which will dramatically change the relationship between you, the cardholder, and your credit card issuers.  These new credit card regulation reforms are expected to take effect by 2010, and many of these new changes will substantially benefit you.

If you’re not keen on reading an entire legislative bill to learn how the changes affect you, have no fear, Shrinkage is Good has broken down some of the most important changes for you so that you can understand your new rights and how they affect you.

The 8 New Rules in Your Favor

1. No more universal default

Universal default allows card issuers to raise interest rates on customers’ base on the customer’s behavior on another unrelated account. For example, if you’ve missed a payment on your utility bill or have your credit score lowered, a card issuer may increase the interest rates on your account.  This policy and practice would no longer be permitted.

2. Sufficient time to pay bill

Credit card holders will be provided with reasonable time to pay their bills.  Card companies are now required to mail billing statements 25 calendar days before due dates, eliminating the current minimum notification of 14 calendar days.

3. Protection against arbitrary rate increases

Credit card companies can no longer arbitrarily change the terms of their contracts with a credit card holder, thus banning the practice of “any-time, any-reason re-pricing.”  If a card holder is subjected to interest rate hikes due to legitimate reasons, card holders now have the right to cancel their card and pay off the remaining balance with existing interest rates and terms.

4. Proper and timely notification of rate increases

Credit card companies are now required to provide cardholders with 45 day notice of any interest rate increase, and card holders will now have 3 billing cycles after the rate increase to say no to these new terms.

5. Fair allocation of payments

Credit card companies will now fairly allocate payments on balances with different interest rates.  For example, you may have a low balance transfer rate on your account with a higher interest rate for purchases.  Current practice has credit card companies applying your payment to the lowest interest rate transaction first, thereby extending the time for you to pay off higher interest rate balances.

6. Right to set limits on credit

Credit card companies will have to provide consumers the option to have a fixed credit limit that cannot be exceeded.  This also prevents card companies from charging over-the-limit fees on a cardholder with a fixed credit limit.

7. No more double-cycle billing

Double-cycle billing allows for credit card companies to compute finance charges base on purchases made in current billing cycle rather than previous billing cycle.  This policy hurts consumers who pay off their balances in full in one statement period but not the next.  Credit card companies will now be prohibited from using this double-cycle billing practice.

8. Protection from due date gimmicks

Payments made by a cardholder before 5 P.M. EST on the due dates are now considered timely.  Credit card companies are also required to provide on every statement, a phone and interest address that a card holder can easily access to pay off balances.  Consumers will now also have the ability to present proof of bill payment within 7 days of due date to waive any late fees imposed by a credit card company.

Is Your Current Card Compliant?

So which current credit cards are already compliant with these new rules? Check out BillShrink’s Credit Cards Bill of Rights to see which card issuers are already complying with which set of rules. Plus, use our tool to easily find out if your current credit card is compliant with these new rules.

Keep yourself updated on the latest money news and tips. Subscribe to Shrinkage is Good today and we’ll be sure to keep you well stocked on money saving advices.

top photo credit: Joe Hatfield

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{ 36 comments… read them below or add one }

Cal December 18, 2008 at 8:51 am

As the Bill is due to take effect in 2010, what’s to prevent credit card companies from rushing to inflate interest rates before then; and, for those of us (with sterling credit history) already victimized by this practice, is there an immediate recourse?

Thanks…

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BillShrink Guy December 18, 2008 at 10:35 am

Cal: Unfortunately you have little recourse to prevent credit card companies from inflating interest rates before these new rules take effect. I’m sure many Citi bank credit card holders are already feeling victimized by this practice. Under current law, although you can’t prevent card companies from raising rates, you still have the ability to letter regarding the recent Citi interest rate increase.

For most situations, you should be able to opt-out of the rate increase (but thereby closing your account once balance and account is settled under current terms).

Hope this helps!

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Larry December 20, 2008 at 12:15 am

Now who in Washington do we rattle to reform debit card holds (see http://www.maine.gov/pfr/financialinstitutions/consumer/debit_hold_brochure.pdf)?

You buy a product online for $500 using your debit card. The merchant bank that processes the transaction detects a discrepancy such as a misspelled billing address and refuses the transaction. The $500 hold remains for several days. You can’t do anything about it. Neither can the merchant–nor their bank. Your bank could reverse the hold, but probably won’t because “it will expire in 3-4 business days anyway.” Meanwhile, you are unable to spend that $500. Worse, you try the transaction again, it fail again, and now there is a $1000 hold on your account.

There ought to be a law.

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Mary Anna Durst February 7, 2009 at 10:00 am

Does a credit card company have the right to cancel a card for non-use before the card expires?
Does a credit card company have an obligation to inform the consumer when the cancellation of the card for non-use is reported to a credit bureau? Thanks for your help.

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evelyn Hayes February 24, 2009 at 5:43 am

My credit card balances are high due to useage during the Hurricane Ike and no settlement as yet (2/09) is there anything I can do to help this issue duringt hese time frames to help my credit score? Capital One has raised everyone’s credit card finance rate due to what they said, “We want our credit position to look good,” What can be done to stop this unfair practice? I can not pay off this bill at this time until settlement comes on my Hurricane Ike house effected.

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Faith Powell March 3, 2009 at 8:10 am

Don’t believe that Bank of America is a “good” card as far as not employing DUE DATE GIMMICKS. I recently made my “third” late payment according to BofA and they have now ratejacked my interest rate from 9.99% to 26.99%!!! The 3 alleged late payments were actually made on time but due to BofA’s deceptive payment posting gimmicks, the 3 payments were credited one day after the due date.

For the last 13 bill cycles, the closing date was manipulated so that the due date would either fall on a holiday or a weekend 50% of the time. And, BofA, unlike any of my other credit cards refuses to accept payments made online – on its own website – as ON TIME if it’s not a business day.

Just add me to the chorus chanting …
“Bank of America” sucks!

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Andy April 28, 2009 at 7:59 pm

With 3 in 4 americans having some level of credit card debt, this reform is long over due.

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Carl May 3, 2009 at 2:01 am

I applaud the reform, it is sorely needed.

I had a credit score of 740 with no late payments and a balance of about $20k from starting a business that became profitable enough after 2 years that I was paying my balance down.

Out of nowhere Bank of America raised my interest from 10% to 26%. No late payments, and I was not not over my limit. Due to this and continued bank shenanigans I was forced into bankruptcy after 3 terrible, terrible years.

Luckily I get to keep my business and I’m enjoying my first month where I actually get to see the fruits of my labor – it’s such a huge relief. Seeing this credit card reform bill passing at the same time makes it even better. I’m very optimistic that it will do some good.

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Dave in CALIFORNIA May 5, 2009 at 1:40 am

On my Citi Gold World AAdvantage MasterCard account, Citi charged its $50 annual fee on 4/17/09 (the last day of my billing cycle), and on the same bill the fee was charged, Citi also charged the purchases finance charge ON THE FEE, for a day. Although I do have a 1.9% balance transfer balance, I did not have any purchases balance at the time.

So, how does Citi know I’m not going to pay off the entire card balance before the May due date, and avoid the finance charge on the fee (which I think should be immune to finance charge entirely, but apparently not). Surely if it’s a “purchase” it’s got to be a “new purchase.”

The only way Citi would know they could immediately charge a finance charge on a new purchase would be for them to be doing double-cycle billing. I checked my terms and conditions, and lo-and-behold, Citi DOES double-cycle billing (i.e., no grace period unless your balance has been paid in full for the past TWO billing cycles).

Might want to update that (or at least confirm with Citi).

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BillShrink Guy May 6, 2009 at 3:44 pm

Dave in CA: At first I was going to suggest that the small finance charge may be because of the clause in your terms which allows for Citi to charge a minimum finance charge… but on further reading you may be right that this particular account may have double-cycle billing (considering the fact that you didn’t make any purchases during the time).

You should also note that even if you don’t have a credit card with double-cycle billing, you may be subjected to finance charge when you make a purchase (or a transaction appears on the account as a purchase, e.g., annual fee). This is because most cards will allocate payment to transactions with lowest interest first.

I checked with the guys and it appears the database is pretty spot-on. It appears new customers for the World AAdvantage card are being offered terms without double-cycle billing and Citi hasn’t gotten around to changing the terms for old customer (slightly unsurprising). What I would do is give Citi a call and ask them if they could update your terms and condition to reflect to the current offering for new applicants. Be sure to check the terms for the current Gold AAdvantage card to make sure there aren’t any glaring difference between it and your old terms (e.g, benefits etc.)!

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mariana a May 28, 2009 at 6:36 am

Capital One is right on! We even got a notification several months ago for a rate increase in my acct. that would only take place after a year (2010)!!! However, apparently, under the new law, it won’t take effect. Wal-Mart, on the other hand, for even 12 hrs late charged me a $26.00 fee!!! Hopefully, that will change too.

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Tom Wilkins June 4, 2009 at 12:10 pm

I just recently read the Credit Card Bill of Rights for the first time. At the moment, I have an Applied Credit Card and am owing somewhere in the hundreds of dollars range. What I did not see in the ‘bill’ is this: over the last 2 days, the credit card company (or so we think) has called 14 times in a 2-day period. Is this considered harrassment and can they be fined for such a practice, even if the card holder still has a debt to pay?

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BillShrink Guy June 4, 2009 at 4:26 pm

Tom: Hmm… from your description, that may not be the credit card company that’s bugging you (and 14 times is definitely harassment in my book but breaking rules or not depends on the hours they call you).

It could be possible that you may have debt that’s in collection that you may not be aware of. My recommendation, if you’re unsure, is to grab a free credit report from AnnualCreditReport.com and check if you have any accounts past due that you may have missed. If any of your accounts are now in collection, it may confirm that a collection company is calling you.

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Brenda June 22, 2009 at 5:05 am

My credit card rate went up to 29% from 8% because of 3 supposed late payment which I am seriously doubting since I always make my credit card payment a priority due to my overdraft protection. Now I am in “default”! I have always been very dilligent about paying my bills on time and have had excellent credit. Now it is considered fair due to all the credit inquiries I have had lately. I cannot afford the next payment and I don’t know what I am going to do. Is there any recourse that I have between now and 2010?

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Anon June 29, 2009 at 3:04 pm

I paid my Citi card 2 days late for the first time ever (3 years with them). I contacted them via secure email to explain the situation (my fault) and politely asked them to waive the fee. They sent me back the definition of a late fee. I told them I understood but that I was asking as a good customer for them to waive it this one time. They refused. I have a feeling that this was because of the “credit protection” plan they have been pushing that would cover situations like this, but it’s not worth paying for that if you are only late once. I told them I would be taking advantage of a balance transfer offer from Capital One. This is fine anyway since Capital One raised my interest rate by 6% points so I no longer want to use the card for anything but the promotional rates. I am lucky to be in a situation where I can leave Citi even though I can’t pay the balance in full right now, but many people are not so lucky. 2010 can’t come soon enough.

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Barbara August 15, 2009 at 7:02 am

As far as I can tell, all this new law has done is give the credit card companies more time to raise interest rates before it goes into effect. I was lucky enough to be able to pay the balance on mine but had to take money from savings to do it and live on a fixed income. (Like who doesn’t?) I always paid more than the minimum and paid on time. Believe me, Citi Card will not get another dime out of me and the card is not being used, ever. If a fee is charged for having it, it will be canceled.

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Sam August 19, 2009 at 9:03 pm

Incidentally, the INTERNAL REVENUE SERVICE practices double cycle billing and worse, which I find more than a little hypocritical. I recently paid $300 of a $400 remaining balance before a due date I received in the mail. Three weeks later I received an $87 interest bill…when I called to ask how $87 could be charged on $100 left remaining, I was told that interest could be based on a previous owed balance, as long as I had any amount left due. They also retain the right to charge interest when they feel like it, there is no set cycle.

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kathy112980 August 26, 2009 at 6:04 pm

be sure to check how credit card companies assesed finance charges..others may offer you a very low rate at first, but be wary of what’s going to be the rate after a promotion expires…if a bank computes int based on average daily balance, then that’s good…i think amex is doing this…

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Tracy September 11, 2009 at 10:01 am

Chase not only raised my credit card rates, lowered my ballance and then raised my credit card rates again…all withing 6 months. I had always made my payments on time and made more than the monthly payment. Now i cannot make a payment when I’m now considered over my limit (fee), higher credit rate (exhorbant rate 29.99%) to make my monthly payment so rediculously high and even if I could pay it, I would still be over my limit, ect.. Because of the Credit Card reform act all money lenders and credit card company’s are doing whatever they want now and there is nothing anyone can do about it. The reform act is too little, too late.

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Crazy Lady September 15, 2009 at 5:13 pm

we’ve had a credit card since june ’07. we’ve had 8 late payments – yes I know that’s bad but we had a hard tim in ’08. We had 6 of the late payments w/in a 7 month stretch – I know sounds terrible; however, the last 10 payments we only had one late payment and that was only because my father in law was sick and passed away we basically just missed the payment due date. Chase has cancelled the card which I understand due to the run of bad luck on our part. I recently called and asked if we could settle the account due to the fact that the interest was killing us, I made a $390 payment and $109 went to finance charges. At this rate we’ll never pay this off. The supervisor told me that we are not able to settle this account because we do not have enough fees on the account (APR 29.99) I then asked how much do we have to pay before we can settle and he told me that we will never be able to settle. Is this right? Please advise as to what I can do to get out from under this debt – which by the way he suggested I transfer the balance to another card. These people are unbelievable.

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Tatoe September 17, 2009 at 8:28 am

The bill of rights sounds good and looks like it may offer some relief but, as long as the banking industry is involved with it in any way, I don’t expect any real change. The lying bastards will just find another way to stick it to consumers. The only thing that will effect real change is for us, as consumers, to quit using the cards altogether or, at the very least, payoff the balance each and every month. We need to demand of our legislators that regulation and control be instituted that will protect consumers from the costly, predatory practices we’re currently subjected to by the banks. Isn’t it interesting that politicians make a big deal and take pride in stepping on the check cashing and pawn business but have nothing to say about the many and creative ways the banking industry steals our money. At least with check cashing and pawn shops, you know what you’re getting when you walk in the door. It’s a shame and a pity that we have to fight to protect ourselves and our money from the very people that we should be able to trust without question!

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Banker September 23, 2009 at 12:56 pm

This is wonderful information, thanks!

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Janice October 1, 2009 at 6:53 am

It is way too late for this reform! How is it even possible that a credit card company can raise an interest rate from 9% to 29%? It has happened to almost everyone I know that has a credit card including myself. I’m no mathmatician but isn’t that more than a 50% increase? That is crazy and unethical! Even if you did make a late payment, that is an unfair increase. The credit system is extremely crooked! Maybe we should all fight back by not making our credit card payments at all. Who would be hurting then?

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Becky October 2, 2009 at 3:13 pm

Reform is great…but not the way this was done. This was like telling a criminal they have months to do whatever the want, because nothing will be done to them until 2010. They will do their worst while they can, and I can say from experience, Citibank and Chase did their worst. After being a loyal customer since 1984, as soon as this credit card ‘help’ came along, my good credit took a downward turn. Payments were made on time and always for at least the minimum. First, they both jacked up my interest rates by astounding percentages. Then, Chase just decided to randomly close 2 of my accounts, which happened to be my oldest accounts. You know, the ones the experts tell you to never close! I decided to pay down my open cards and what did they do for 25 years of loyalty? For every chunk of money I put on the account, that’s at least the amount they cut my credit limit. In effect, with this practice, my debt to available credit ratio will never get better, it is worse because my ratio is smaller. Plus, I now have 2 ‘closed by creditor’ accounts on my credit report. Before the ‘help’ I didn’t worry about my credit rating, now, with closed accounts, slashed credit lines and a smaller debt/available ratio, my credit score is lower. What kind of help is that for the consumer? There is nothing you can do about it but accept you got screwed for paying your bills on time and for paying your balance down. What would have been better is if this reform came with a hold on any credit changes until the new terms went into effect. Maybe then it would have truly been a help to consumers. JMHO

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Patricia weg October 13, 2009 at 2:39 pm

I would like to know if this is legal I paid most of my chase balance last month only with a balance left of 961.00 and they are charging me interest on the whole amount of 4991.62. shouldn’t they only charge me interest on the 961.00?

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BrenyB October 28, 2009 at 7:39 am

How can you say Citi is in compliance on arbitrary rate increases? They just raised ALL rates regardless of your credit rating to 29.99% unless you opt out. Also, they cancelled all their gas-branded cards with no warning. You might want to review your research on this.

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Susan Lynn-Rivera December 15, 2009 at 4:53 pm

When I used my bank’s bill pay for a November payment to American Express, they sent a check to them on the evening of Nov. 13th to arrive before Nov. 18th. However, the check was not cashed by American Express until Dec. 8th. Although I gave them proof that my bank mailed the check on the 13th of Nov. (They only accept physical checks-I wonder why), they are still charging me a late fee and raising my interest rate. They said they are not responsible for 3rd party mistakes. They insist they have no responsibility for the mistake as they deposit the checks within 2 days of receipt. They claim it must have been the post office who made the mistake, but insist I must pay for it! Fair?

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Matt December 30, 2009 at 11:32 am

I’m wondering about #2 of the Credit Card Bill of Rights.
http://www.billshrink.com/credit-cards/bill-of-rights/

“The right to have rates reviewed and reduced: Issuers are required to review APRs of all accounts every 6 months to see if a reduction in APR is warranted.”

I’m trying to find out, but does anyone know if the law defines “warranted?”

What happens if 6 months go by, and I’ve paid on time, not gone over limit, and the issuer reviews my account and says “Good for you!” and does NOT reduce my rate?

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Alisa January 7, 2010 at 6:28 am

I just noticed that even though I was paying more than the minimum due on both my Capitol One and my Chase card, the entire amount was appkied to the lower APR’s on both accounts. I thought the 2009 Credit card Reform mandated that anything over the minimum due, was to be applied to the higher APR. Is there someone (agency) we can report the credit card companies to when they do not follow the law?

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Alex January 28, 2010 at 9:59 pm

If you decide to opt out of your credit cards rate increase, will that effect your credit score?

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Matt February 16, 2010 at 8:50 am

Alex, I would GUESS it might.

When you opt out, you’re basically canceling the card. You still get to pay monthly at one now unchanging rate til it’s paid off, but you won’t be able to access any credit with that card again.

The reason I’m guessing it would affect your credit score is because part of your score is determined by debt:AVAILABLE credit. If you had 5k on that card you opted out on, and it had a limit of 20k, that remaining 15k is no longer AVAILABLE. Now, the 5k is just 5k of debt, and it will affect that ratio.

It sucks all around, period.

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Kelley February 19, 2010 at 2:55 pm

I agree that Bank of America SUCKS!!!!
In December my payment was ONE day late, for the first time ever!!! My fault, I had the payment scheduled for the 7th instead of the 6th. Our rates went from 8.9% to 29.9%. That’s just CRAZY!!!! It added $150-$200/ month to our minimum due. We are not using the card and the minimum remains the same.
CITI also sucks!!!! I had $202 available credit, I spent $174….The interest put me over the limit and I was charged an over limit fee. Now my monthly payment is double!
The goal of ALL creditors is to keep Americans in debt!!! I’d love to just cut them all up, but with the fees causing the montly payments to be so high, ALL of the “extra” intended for savings and day to day living, goes to paying the credit card and then we need the card for even necessities like gas and food!!! It’s a catch 22!!!
Credit card companies all stink!!!! But I must agree Bank of America is the WORST!!!!

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Angela February 22, 2010 at 8:06 pm

What do you do when a credit card company lowers substantually your amount of your balance. When you have paid over and on time and have made purchases paid it off and have not defaulted on anything you agreed when you opened your account. Then you get a notice saying your balance is now only allowed 1300 less than you were allowed to borrow. For reasons like you dont have enough credit and you dont have enough money available but you have done nothing wrong. No missed payments infact a 1500.00 payment was just recently made to bring balances down. Are they allowed to that pull something off my credit report or say they did even though we were not at default of any terms?

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Lisa February 26, 2010 at 3:31 am

I am being hounded by Capital One on behalf of my son who is in the military. He has been over his limit for many months, and has paid it down substantually; however there is still a over the limit balance. CO is now calling my home, atleast 10 times a day, starting at 8 am through 9 pm. How can I find out his rights, as I have power of attorney for him? I’m sure they are hounding him becasue they have now been limited to the amount they can charge him for being over the limit. Thank you.

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raj April 24, 2010 at 8:45 pm

I have had a balance on a citi card of about $18,000 at 2.9 % APR for the last 3 years and have been making the minimum payment. By mistake, we cahrged $400.00 on this card and tilll now we have been paying a 22.9 % apr on this amount. Not a big sum of interest but it adds up. This month I paid off more than minimum and am no more paying interest on $400. Would not have been possible without this law. We should congratulate Obama.

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carol burgeson July 31, 2010 at 1:57 pm

I am curious–I have a ton of toys r us dollars and went to buy a camera. My children are now in college and I am no longer buying toys, bikes or coloring books. I was told by toys r us that even though I have enough dollars in their bonus bucks, I can only use five of the 10 dollar ones. Can a company legeally limit how you spend your bonus bucks, thanx, carol

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