In the past few years until today, more and more frequently credit card providers have been imposing spiking penalty interest rates on customers whose payments are just one or two days late. Many customers have seen a notice of “change in terms” that warns them on the increase of interest rates in case of late payments.
In the past, banks have continuously increased their “evil tactics” to victimize consumers during the credit cycle. One of their ‘tactics’ is changing due dates on customers so that they are tricked into making late payments.
But with the new bill signed by Obama in May 22, the credit card industry are forced to stop retroactive interest hikes and other predatory practices. This new bill will be effective in February 2010. Customers will be able to read their credit card agreements on the Internet and even make their payments online or by phone without any added fee. They will be given a chance to avoid the over-the-limit fees and receive a 45-day notice prior to an interest rate increase.
Below is the new federal law that will prevent credit card issuers from committing the following actions:
• Imposing retroactive interest rate hikes on balances accrued before an increase becomes effective, unless the cardholder is more than 60 days late on a bill. If such hikes occur, issuers must lower the rate after six months of on-time payments following the increase. Also, card companies won’t be able to raise rates in the first year after an account is opened.
• Deeming a ‘universal default’ on existing balances based on adverse information unrelated to a customer’s usage behavior.
• Charging arbitrary, sky-high penalty fees, with fines remaining proportional to the late or over-the-limit violation. Over-limit fees are prohibited unless the consumer agrees to allow over-limit transactions.
• Applying payments deceptively — i.e., card companies must apply payments larger than the minimum amount to the balance with the highest interest rate.
• Billing a cardholder unfairly, such as with ‘double-cycle’ billing or imposing interest charges on any portion of a balance that is paid by the due date.
• Requiring ‘pay-to-pay.’ Card issuers cannot charge a fee for any allowable payment method, with the exception of expedited service provided by a service representative.
• Marketing to consumers under 21, unless the individual has an independent means to pay down a loan or has a co-signer with such an ability.
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