For too many years the credit card industry has been quite loosely regulated.
The credit card industry has been able to change credit limits, fees, and annual interest rates at will and consumers were the ones to feel the effects.In order to put this under control, President Barack Obama recently signed the credit card consumers "Bill of Rights." The goal is to provide consumers with relief as fee limitation and contract change notification revisions are part of the legislation.
President Obama stated that this action will provide credit card holders with the "the strong and reliable protections they deserve." The goal is to improve consumer confidence, make consumers more aware of their responsibilities, limit the changes made by credit card companies, and restore balance to the state of the American Economy.
What Will the Bill of Rights Do?
The Bill of Rights legislation:
- Requires credit card companies to first apply payments towards balances with the highest interest rates
- Universal default or the process of raising consumers' rate on existing balances based on late payments to another lender is now prohibited
- Lenders will now need to provide a 45-day advance warning for rate increases
- Upon notification, unless a consumer is 60 days late with a payment, rate increases could not be applied to current balances
- Rate increases can only apply to future purchases
Assuming the bill is passed into law, it will take an additional nine months to come into effect.
What are your thoughts on on this credit card crackdown case?
