New Rules Will Protect Credit Card Customers
Nearly every consumer has one – a credit card of some type, and starting Monday morning, Feb. 22, the credit card industry was presented with some new regulations to operate by. At the same time, consumers received some new protections and affirmations of their rights with credit card companies from the new legislation.
Iowa Attorney General Tom Miller issued the following information on the new U.S. Credit Card Act, and what it means to consumers.
One of the biggest provisions of the new act is limits on interest rate increases. Under the new credit card act, credit card companies must give a customer 45-days notice of any significant change to their credit cared terms. The interest rate on a new credit card cannot be increased in the first 12 months that the customer has the card. It is illegal for the card issuer to increase the interest rate retroactively unless the customer is 60 days late on a payment. If a customer has their interest rate (Annual Percentage Rate) increased because of a late payment on a card, after six months of on-time payments, the APR must return to the prior lower rate. Companies can no longer raise interest rates if a customer is late paying on another company’s bill or credit card account.
Another provision of the legislation is a requirement to present more credit card billing information for the customer. The customer’s monthly billing statement will now include information about how long it will take to pay off the balance on the account, if making just the required minimum payment. The statement will also show what would be required to pay off the account in three years. Another requirement is that bills must be sent to the customer at least 21 days before the bill is due. Finally, each statement must include a telephone number and internet address, as well as information on how customers can make payments.
Underage customers also receive some new protections under the act. If a customer is under the age of 21, they must prove that they are financially independent in order to open a credit card account, otherwise they will need to have a co-signer who is over the age of 21 and willing to be liable for the debts. And, the act puts a stop to “freebie” cards, where companies offer terms to students to get them to sign up for a card on or around campus, or at a college-sponsored event.
The Attorney General’s office urges people to manage their credit cards carefully in order to avoid expensive credit card debt. Consumers should pay on time and pay the full balance each month, if possible. Most credit card companies will not impose a finance charge (except on cash advances) if the consumer pays the balance in full before the due-date of the bill. Consumers should avoid maxing-out cards or paying only the minimum amount due each month.
More information about credit card protection: