8 New Credit Card Reform Rules You Should Know
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.
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top photo credit: Joe Hatfield
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…
Comment by Cal — December 18, 2008 @ 8:51 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!
Comment by BillShrink Guy — December 18, 2008 @ 10:35 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.
Comment by Larry — December 20, 2008 @ 12:15 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.
Comment by Mary Anna Durst — February 7, 2009 @ 10:00 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.
Comment by evelyn Hayes — February 24, 2009 @ 5:43 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!
Comment by Faith Powell — March 3, 2009 @ 8:10 am
With 3 in 4 americans having some level of credit card debt, this reform is long over due.
Comment by Andy — April 28, 2009 @ 7:59 pm
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.
Comment by Carl — May 3, 2009 @ 2:01 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).
Comment by Dave in CALIFORNIA — May 5, 2009 @ 1:40 am
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.)!
Comment by BillShrink Guy — May 6, 2009 @ 3:44 pm
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.
Comment by mariana a — May 28, 2009 @ 6:36 am
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?
Comment by Tom Wilkins — June 4, 2009 @ 12:10 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.
Comment by BillShrink Guy — June 4, 2009 @ 4:26 pm
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?
Comment by Brenda — June 22, 2009 @ 5:05 am
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.
Comment by Anon — June 29, 2009 @ 3:04 pm