UPDATE: the Wall Street Journal Online just had an article with more details and information. It might only be available for subscribers, but you can find it here.
Yesterday I received an interesting notice in the mail: Citibank was changing the policy on one of my credit cards to include a $60 annual fee. I had the privilege of "waiving" the fee if I charged at least $2,400 a year but otherwise I had to pay.
No horn tooting here, but I've never once carried a balance on the card, and have excellent credit in the high to mid 700's - so why this sudden change?
I am convinced that these changes are the result of product restructuring due to new government regulations in the Credit CARD Act of 2009, also known as the Credit Card Accountability Responsibility and Disclosure Act of 2009, which is going in to full effect on February 22nd 2010.
The act limits rate increases for delinquent payments, and requires much more stringent rules for fees, payment and repayment options and interest rates. In other words less potential fee and interest income, especially from weird customers like me.
The key clauses in this act restrict credit card companies from:
Credit card compaines are also no longer allowed to change the interest rate that an outstanding balance was originally set at - so if you wracked up $10,000 in debt at 10% interest, and they temporarily raise the interest to 29%, this new rate does not apply to the original debt; plus they can only change the rate every six months.
Another requirement is a minimum amortization of at least 5 years (they can't force you to pay it off quickly). It's also now prohibited to raise interest rates within the first year of the card being opened and penalties for on time payments and double billing are now banned.
- Increasing rates retroactively
- Increasing rates if you don't pay the minimum required payment on your card (within 60 days of it being due!)
- If you do pay the minimum within 6 months they are required to terminate the higher interest
Credit card compaines are also no longer allowed to change the interest rate that an outstanding balance was originally set at - so if you wracked up $10,000 in debt at 10% interest, and they temporarily raise the interest to 29%, this new rate does not apply to the original debt; plus they can only change the rate every six months.
Another requirement is a minimum amortization of at least 5 years (they can't force you to pay it off quickly). It's also now prohibited to raise interest rates within the first year of the card being opened and penalties for on time payments and double billing are now banned.
There are also restrictions on providing credit cards to people under the age of 21, which is going to put a crimp on many a college student's free t-shirt collection.
Needless to say, I called and cancelled the card. Now that we are on a cash only budget we hadn't been using it anyway and even if we ask the cats it was pretty hard to find a annual fee fan in this house.
You can read the full bill (PDF) passed by both houses here, at the Thomas.gov Library of Congress website.
Census
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