Credit Card Law Changes July 2010

Consumers have finally won a battle that was long over due. Last May regulators began discussions on passing new banking rules that would stop some of what I consider criminal tactics, used in the daily business of the Credit Card industry. These in my opinion are the first real Pro Consumer rules to pass in my 27 years of existence.

The banks will argue that they are going to lose billions of dollars. They are estimating as much as 10 billion at this point. However their argument has one rather large hole. The banks have calculated this using the revenue generated from the unlawful practices they have been using on consumers for years. Fees that if banks were the mafia they would have been charged with racketeering and loan sharking. But because they have “lobbyist” they have been allowed to screw the consumer in excess. Below is a summary of the Final Rule on Unfair Credit Card Acts or Practices. The Office of Thrift Supervision is urging banks to adopt this practices as soon as policies and systems can be updated but I will not hold my breath.

I. Interest Rate Charges- Banks will be required to disclose the annual percentage rate ( APRs ) at account opening and prohibits them from raising rates unless expressly permitted. The bank is permitted to raise rates after a specified period if the increasing rate was disclosed at account open. The bank is also permitted to raise rates on new transactions after an account is open for a year and after providing a 45 day advanced notice. They may also increase your rate on existing balances if you ( the consumer ) is more than 30 days delinquent in paying the credit card bill.

II. Reasonable time to day – Prohibits banks from treating a payment as late unless the consumer has been provided a reasonable amount of time to make payment. The rule defines this as a minimum of 21 days.

III.  Payment Allocation – This will require banks to apply payment amounts in excess of the minimum payment using one of two specified methods: by allocating the excess payment to the highest interest balance, or proportionately to all balances. ( In my opinion a concession so the Banks can still work interest fees at least partial to their advantage. )

IV. Double-cycle billing – Prohibits banks from using a practice called double-cycle billing where interest charges are assessed using your average daily balance over two months. This means if your balance was $1000 in one month and you paid $500 your average daily balance would be calculated with $1500 instead of $500. This especially hurts people who pay off their balance because they will still pay finance charges even though they pay their balance in full every month.

V.  High-Fee sub-prime cards- Prohibits banks from charging fees for granting credit through a sub-prime card using the majority of the available credit during the first year after opening the account. More specifically, fees exceeding 25 percent of the available credit must be spread over no less than the first six months that the account is open, rather than charged in their entirety during the first billing cycle.

Link to Office of Thrift Supervision Press Release