This Sunday, August 22, marks the day the final provision of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 goes into effect, helping you get that much closer to finding debt relief from your credit cards.
Originally signed into law by President Obama last year, the new laws were designed to end many of the not-so-customer-friendly practices in the credit card industry, enhance consumer disclosures, and provide some added protection to cardholders under 21. The law was scheduled to roll out in 3 phases, this Sunday being the last installment.
Here’s what the final phase of the CARD Act means for you:
• Any and all penalty fees that you may incur are now required to be “reasonable and proportional to the omission or violation.”
• Creditors must now periodically review all interest rate increases starting in January 2009, and must work to reduce rates when “warranted.” (What warrants a warrant? Currently it seems that’s open to interpretation, so if you’re looking to try your hand at fixing credit, make sure you’re up to date on your accounts.)
• Card issuers are no longer allowed to charge a penalty fee of more than $25 for late payments or any other violation of the card’s terms unless the consumer has “engaged in repeated violations or the issuer can show that a higher fee represents a reasonable proportion of the costs it incurs as a result of violations.” So, don’t be late on your bills if you want to avoid slipping into credit card debt.
• Your credit card issuer is also no longer allowed to charge penalty fees that outweigh the dollar amount associated with the consumer’s violation. So if you’re late on a $50 payment, your card company can no longer charge anything above $50 as a late fee.
• Finally, the new CARD Act wipes out any service fees on gift cards that have remained inactive, and requires to the cards stay active for no less than 5 years. That means that McDonald’s gift card your favorite aunt or uncle sends you every year for your birthday is probably still good to go.
Here’s a quick rundown of what was included in the first two phases of the CARD Act:
• Card issuers are now required to give 45 days’ notice before they roll out any significant changes to your account or interest rate. They’re also no longer allowed to impose any arbitrary increases to your interest rate.
• The CARD Act also prohibits creditors from charging fees for going over your credit limit unless they allow you to complete those over-the-line transactions. One more reason to keep your card balance below 30% of the available amount.
• Any payments you make to a card that’s above the minimum required payment for the month must be applied to whichever credit card carries the highest interest rate.
• Any time your card company plans on raising your annual percentage rate, they must now notify you as to why they’re doing so.
• If you’re under 21 and want to get your hands on that shiny new piece of plastic, plan on bringing along a parent or guardian willing to take responsibility for any outstanding debt you may well (read: probably will) accrue if you can’t pay it off yourself. Either that, or prove that you’ve got the means to take care of the card on your own (i.e., proof of employment) and that card is yours.
These are your rights under the Credit CARD Act, designed to better inform of and protect you from those dastardly credit card companies. If you find you’re still in need of credit repair services, give one of our specialists a call.
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