The Credit Card Legislation Act of 2009
Attorney
(866) 735-1102 Ext 315
Tags:
None
CNN Money Reports that Obama is set to sign new-credit card legislation today. The Credit Card Legislation Act of 2009 includes a consumer “Bill of Rights” geared towards protecting consumers and makes it more difficult for credit card companies to increase interest rates.
Under the act, interest rate hikes are prohibited unless the credit card holder is late 60 days or more with a payment. Even then, the original interest rate must be reinstated if the card holder has maintained six months of steady payments.
Furthermore, if a consumer is subjected to an interest rate increase, the credit card companies are banned from retroactively applying that new interest rate to pre-existing balances.
For example, a consumer has a credit card with a balance of $5,000 and is notified by their credit card company that their interest rate is increasing due to a late payment. That new rate only applies to any new purchases. After six months of regular timely payments the interest rate will divert back to the original interest rate.
The act also changes the way credit card payments are applied. Although minimum monthly payments will be allocated as usual, overage fees must be applied to the charges bearing the highest interest rate.
The act is scheduled to come into effect in approximately nine months. Opponents of the act contend that it may force credit card companies to drop some of its risky card holders and may make it more difficult for small businesses to obtain credit cards.
In an article titled US Retailers Fear New Law Could Curtail Store Credit Cards, some retailers are asserting that the new legislation will decrease business. This is largely because store cards are often used to offset the price of a big ticket item. This is done by either offering an immediate discount or teaser rates of no payments or interest for six months.
Now, retailers may have to conduct a more thorough credit report on the consumer. Retailers claim this could now take days instead of minutes, which would deter some people from purchasing expensive items.
CNN Money reported that:
Treasury Secretary Tim Geithner said Monday he was not concerned about a consumer debt "bubble."
"Americans are going to be reducing how much they borrow, improving their balance sheets, saving more," he said. "Banks are still going to have losses they're going to have to adjust to. And that's what's going to make the process of repair here longer. . .But that's a necessary, healthy process of adjustment for us to go through."