New Credit Rules Offer Solutions To Consumers

As financial markets in the United States struggled, one particular area of concern was lending. People were able to get absurd amounts of credit however, it came at a great cost to them: high interest rates, costly penalties, and bad credit ratings. As a result, the amount of credit card debt the average American family carries is $10,700. Realizing many of the problems in consumer lending, the Federal Reserve gathered to reform the system. Late

last year, they issued a 1,100 page document listing the rules that card issuers must follow, which will take effect February 22, 2010. The new rules for credit card companies mean new protections for consumers and curtails many of the questionable practices by credit card companies. Here are some of the changes.

Communication

Before these rules were passed down, credit companies were able to make changes to interest rates, fee structures, and terms, without notifying the consumer. When the changes take effect, they must give 45 days notice before they plan to increase your interest rate; change fees such as annual fees, cash advance fees, and late fees; or make other significant changes to the terms of your card. At that time, they must allow consumers the option to cancel the card before the fee increases take place, however if you decide to take that action, the credit card company can close your account and increase your monthly payment.

Faster payoffs for some borrowers

The new law offers protection for consumers who were tricked into consolidating their bills through low-interest or no-interest rate transfer offers, but neglected to read the fine print. If the consumer was unfortunate enough to make a purchase on the card, they would soon find that they were accumulating interest no matter how much they paid on their bill every month. Instead, they had to pay off their low interest bills before their payments would go to their current high-interest purchase.

No increases in interest rates for the first 12 months

The new rules put a moratorium on the ability of credit card companies to raise interest rates for one year after issuing the card. This helps put an end to the practice of bait and switch where the credit card company increases interest rates after the consumer makes their first purchases.

Helpful Consumer Information

Monthly credit card statements will be required to include information on how long it would take you to pay off your balance if you only make minimum payments. Additionally, the statements will tell you what you need to pay monthly in order to completely pay off the balance.

Unfortunately for many consumers, these protections come too late. As mentioned before, the average American household has $10,700 in credit card debt. Many consumers have sought the help of a debt settlement program to lower their debt to credit card companies. Greenshield Financial Services is a Financial Health Management Company that specializes in a debt settlement program as alternatives to debt relief, debt help, and bankruptcy to help you learn how to get out of debt.