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.
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.
- 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.
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.
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{ 4 comments… read them below or add one }
I think this particular card act is a good thing. That way, banks can no longer just charge us with high rates all of a sudden. The bad part is that one way or another they will get money from you.
I don't think it's fair that they charge us for this. It's supposed to be helping us cut costs, not helping them find new ways to gain.
I, too, received a notice from one of my creditors as well. I have to make sure that I follow up with reading the additional information to make a determination about how I want to proceed. Unfortunately, many consumers will not take the time to read the disclosures and will not be aware of what their rights are and if they are being violated.
I speak with a lot of college students who have gotten themselves in a financial mess early in life by getting credit cards minus the ability to repay or ended up not paying later down the road. The portion that addresses anyone under 21 is good. Too, there are also additional details that protect them as well.
The best thing that consumers can do is to read the information about the Act and also read the information that the creditors provide.
My recent post Teen Credit: The good and bad that you need to know.
I think the new law is a good thing and I welcome it. It will lead credit card companies to be choosier about who they want to do business with. But, they probably hate customers like you because they can't make any money off of you! I don't have any credit card debt now and I'm proud of that fact but it hasn't always been the case. My only insurance for saving those interest fees is not using the card. So, those new changes won't affect me at this point.