New Credit Lending Laws Aim For Debt Relief

On Feb. 22, 2010, the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) takes effect. The act is designed to protect consumers from some of the suspicious acts of lenders by attempting to put a leash on credit card companies. These new rules, while helpful to consumers, can be difficult to keep up with and understand through all of the confusing text. Here are some of the high points:

• Credit card companies cannot raise interest rates for the first 12 months after an account is opened.

• These rate increases can only apply to new charges on the account.

• Annual fees or application costs cannot exceed 25 percent of your initial credit line.

• Companies are restricted from double-cycle billing.

• Over-limit fees are restricted unless the cardholder opts in.

• No fees to pay credit cards online or over the phone unless the payment is on the due date.

• Creditors must give 45 days notice of pending rate or fee hikes, or other major changes to the credit card terms.

As you might expect, there are exceptions to the rules. Those include:

• Rate hikes are not outlawed if you are more than 60 days late with a payment.

• Some lenders have gotten around the rate hike issue by making introductory interest rates as high as 29.9 percent, then refunding part of that rate as the consumer pays their bill on time.

• For credit cards that don’t have grace periods, double-cycle billing is legal.

• Some credit companies have recently called cardholders asking them to opt in for over-limit fees in exchange for lowering the fee. What they aren’t telling consumers is that the only way they could ever charge those fees is by opting in.

Other changes involve billing statements, payments and disclosures.

• Billing statements must be sent at least 21 days before the due date.

• The due date should be the same day every month.

• Payments are considered on time when they arrive by 5 p.m. on the due date, or the next business date after a holiday or weekend.

• Payments above the minimum must be applied to the highest rate balance first.

• Monthly statements must include information on how long it will take a debtor to pay off their balance if they make minimum payments and the total amount they will pay, including interest and principal.

• Statements are also required to include a warning that says by making minimum payments the consumer will pay more interest and will take longer to pay off.

Many people who have gotten into financial trouble at the hand of credit card companies have turned to debt settlement programs that help them navigate these deep, difficult waters. A debt settlement company settles your debt with a credit card company for less than the amount that you owe. 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.