New Credit Card Regs Effective Today

(See entire posting on this issue at February 10, 2009)

New Credit CARD Act of 2009 rules went into effect TODAY, and the are actually some decent regulations

1. Card Issuers will have to check on the customers ability to repay before issuing cards. Sounds common sense doesn't it! It will be unreasonable, under the new regulation and always has been based on life, for a card issuer to give a card to someone without income or assets, and for a card issuer not to review such information.

2. Before you can be assessed an over-limit fee, you will have to AGREE to allow over your limit charges to be accepted. It is not like so many other programs where you have to say "no" or your in, here if you do not say "YES" you cannot be assessed a fee or penalized in any way if you are approved for an over-limit charge

3. If the Card Issuer is going to increase your rate, for any reason, you must receive at least 45 days notice, and then the increase can only apply to charges/cash advances AFTER the 45 day date. Old balances pay at the old rate of interest.

4. Your rate cannot be increased, in nearly all circumstances, for the first 12 months you have your card. The exceptions include if you get a variable rate card where the interest rate is supposed to go up and down; or if you are more than 60 days late in the first 12 months.

5. If you are under 21, you will have to show that you can afford the payments on your maximum credit limit, or have an over 21 co-signor.

6. Card issuers will not be able to make deals with colleges or high schools to come onto campus to offer cards if the card company offers the school an incentive to let it in.

7. Payment dates must be the same day (1st 4th 8th 27th etc) each month and if the payment date falls on a holiday or weekend, not late fee or penalty can be assessed

8. The new statements must contain information in bold type of the New Balance, Minimum Payment Due, and the Due Date. There must also be a warning of what will happen to the rate and when it will happen if a payment is late. The biggest change in statements is that each month it MUST show how long it will take to pay off the balance at the present interest rate if you make Only The Minimum Payment; AND HOW MUCH YOU WILL HAVE TO PAY, TO PAY OFF THE BALANCE IN 3 YEARS. It must also show how much in total you will pay in each case

9. Credit Card Issuers MUST post their agreements on their websites, have the agreements first approved by the Federal Reserve, and have the Federal Reserve Board post them on the Fed’s comprehensive and advertised Card Agreement Website. (WELCOME TO 2010!)

Note: The full 841 page bill with commentary before final adoption is available at the Federal Reserve’s website but a shortened version along with the long one is at: www.federalreserve.gov/consumerinfo/wyntk/creditcardrules.htm

Others At:

http://www.fdic.gov/regulations/laws/rules/6500-1400.html

http://abclocal.go.com/kgo/story?section=news/7_on_your_side&id=7252770

http://www.youtube.com/watch?v=EGY0jooXIsU&feature=player_embedded

Author's Copyright by Richard I. Isacoff, Esq, February 2010

rii@isacofflaw.com
http://www.isacofflaw.com/

New Credit Card Rules - Finally!

In August of last year some of the new Credit CARD Act of 2009 rules went into effect, saving the most far reaching provisions until February 22, 2010. That’s right, just a few days from now. So, what has Congress in store for us now? Actually some decent regulations

1. Card Issuers will have to check on the customers ability to repay before issuing cards. Sounds common sense doesn’t it! It will be unreasonable, under the new regulation and always has been based on life, for a card issuer to give a card to someone without income or assets, and for a card issuer not to review such information.

Currently, most card issuers just check the credit ("FICO") score, or maybe the score and the recent payment history. NEW: Now there must be policies in place to determine the ratio of debt obligations to income; or the debt obligations to assets; or the amount the consumer will have remaining after paying debts. The card issuer may rely on the information provided by the consumer on his/her application. Otherwise the company will have to gather information on deposits, assets, income - just like a real lender. If you "stretch" your income on a credit application (show more significantly income than you make each month) do not look for the laws to help defend you.

2. Before you can be assessed an over-limit fee, you will have to AGREE to allow over your limit charges to be accepted. It is not like so many other programs where you have to say "no" or your in, here if you do not say "YES" you cannot be assessed a fee or penalized in any way if you are approved for an over-limit charge

Right now, many card issuers love it when someone goes $.01 over the authorized limit because the card company can charge a fee of whatever it wants, but commonly $39. True, you do not get rejected at the check-out counter but, maybe you would want to know before buying a hamburger at McD’s for $1.00 and paying $39 for the privilege.

3. If the Card Issuer is going to increase your rate, for any reason, you must receive at least 45 days notice, and then the increase can only apply to charges/cash advances AFTER the 45 day date. Old balances pay at the old rate of interest.

At the present, if you get a rate increase, your fault for being late too often or because the card company is greedy, the increase applies to all outstanding balances - old/existing and new. Now it will be only on the new activity.

4. Your rate cannot be increased, in nearly all circumstances, for the first 12 months you have your card. The exceptions include if you get a variable rate card where the interest rate is supposed to go up and down; or if you are more than 60 days late in the first 12 months.

Teaser rates - will be nearly a thing of the past. The company will have to disclose the teaser rate period and the actual rate it will charge after that period is up And the teaser period must be at least 6 months

5. If you are under 21, you will have to show that you can afford the payments on your maximum credit limit, or have an over 21 co-signor.

We all know of the horror stories about the 17 or 18 year old high school student who get an offer in the mail, sends back the YES I WANT IT postcard, gets a $7,500 credit limit, and then cannot make the minimum payments after one payment is missed and the rate goes from 5% to 30.99% Will this be annoying? Sure, but it will prevent a good deal of anxiety on the part of those under 21 who got "swindled"/misled/were easy marks. If the under 21 can show that he/she can pay, from a provable source, then the card company is permitted to issue the card.

6. Card issuers will not be able to make deals with colleges or high schools to come onto campus to offer cards if the card company offers the school an incentive to let it in.

Surprised that schools would get kick-backs? Why be surprised - look at college football! If there is any kind of permission given, both the school and the card company MUST disclose all arrangements; any that pay the school will be deemed illegal.

7. Payment dates must be the same day (1st 4th 8th 27th etc) each month and if the payment date falls on a holiday or weekend, not late fee or penalty can be assessed

Credit card companies love changing the day a payment is due to, for instance, "25 days from the date the last payment was received if it was not received late". Who knows when the company receives a payment. Also, weekends and holidays are bonus days for companies because they have earned a great deal of late fees the day after those days.

8. The new statements must contain information in bold type of the New Balance, Minimum Payment Due, and the Due Date. There must also be a warning of what will happen to the rate and when it will happen if a payment is late. The biggest change in statements is that each month it MUST show how long it will take to pay off the balance at the present interest rate if you make Only The Minimum Payment; AND HOW MUCH YOU WILL HAVE TO PAY, TO PAY OFF THE BALANCE IN 3 YEARS. It must also show how much in total you will pay in each case

9. Credit Card Issuers MUST post their agreements on their websites, have the agreements first approved by the Federal Reserve, and have the Federal Reserve Board posat them on the Fed’s comprehensive and advertised Card Agreement Website. (WELCOME TO 2010!)

Note: The full 841 page bill with commentary before fianl adoption is available at the Federal Reserve’s website but a shortened version along with the long one is at:

www.federalreserve.gov/consumerinfo/wyntk/creditcardrules.htm

Others At:

http://www.fdic.gov/regulations/laws/rules/6500-1400.html

http://abclocal.go.com/kgo/story?section=news/7_on_your_side&id=7252770

http://www.youtube.com/watch?v=EGY0jooXIsU&feature=player_embedded

Author's Copyright by Richard I. Isacoff, Esq, February 2010
rii@isacofflaw.com

http://www.isacofflaw.com/

Credit Cards - Rep. Barney Frank's Frustration (Mine Also)

Rep. Barney Frank (D), Congressman from Western MA, wants to "push up" the effective date of the new Credit Card regulations. He is prompted by the frenzy of card issuers raising rates, cutting limits, changing terms, and adding fees, all to beat the starting date of the laws. The laws merely set limits on how and how often card companies can change the terms of the agreement you have with them, without prior notice.

The standard argument, that there is no contract unless both sides agree, is not able to be put forth, because in the agreement you signed originally you gave the company the right to make all of these changes, even to your detriment. Is it fair? NO!, Is it legal? Yes, but only until the first of the year.

Congressman Frank's frustration is understandable, especially if you have a card and have been "slammed" by the card company with rates and fees you never anticipated. That these same companies, CitiBank, Bank of America, Chase, all have Federal Money from the bailout is beside the point. As stated in an earlier post, this is how they were able to report record earnings last quarter.

Congress will not change the date to October as Congressman Frank wants, but at least the issue is again being discussed. Unfortunately, the Congressman may suffer a decline in his credibility with his colleagues, but he will have a boost from his constituents.

Right now, everyone should be examining his/her cards and statements to determine if the terms have suddenly changes, if rates are higher, credit limits lower. If you need a card try a local financial institution. If none issue cards, shop for a new one, if yours is not playing fair. Be certain that you read the "Agreement and Terms" disclosure that will be your contract, BEFORE you use the card. Do not hesitate to decline the card even after it is issued to you. Be certain however, that you follow the rules on terminating the relationship or you could find an open credit line, detracting from your credit score, all the while believing that the card account was closed.

To be safe about credit, whether it is cards, loans, mortgages, joint accounts, "authorized user" cards (where the credit is based on someone else who has given you a card to use), get at least one credit report every six months. They are free from http://www.annualcreditreport.com/ .

Check to be certain that only the cards you use are open. Close everything else. While there may be a slight drop in your credit score (see posts of 7/27/09 and 6/11/09), the risk is far less than if you have unused and unwanted open credit lines affecting your score and overall credit standing.

Author's Copyright by Richard I. Isacoff, Esq, September, 2009

rii@isacofflaw.com

http://www.isacofflaw.com/

Credit Card Laws - Sweeping Changes

The predictions of a difficult passage for the new Credit Card Legislation proved to be wrong. Congress, both the House and the Senate, fought back attempts by the finance industry to kill the Bill that will vastly alter the landscape of Credit Card issuance and cost to borrowers/users.

The formal name of the new law is the "Credit Card Accountability Responsibility and Disclosure Act of 2009"or the "Credit CARD Act of 2009" (note - the capitalized "CARD" is part of the actual name) Perhaps another, equally appropriate name would be the "Consumers Attempt at Revenge by Dodd Act of 2009". (Senator Christopher Dodd (D. CT) was the Senate’s primary sponsor and "pusher" of the bill.)

The details of the new law, known as Public Law No. 111-24, are yet to be finalized, as regulations have to be promulgated by various Federal agencies, but the main provisions are truly sweeping. Before briefly discussing each change or addition to the existing laws/rules, it must be noted that the Credit Card industry won one major battle. The original bills in the Senate and the House set an interest rate cap of 15% on any credit card. That provision never made it to a final vote. The industry Lobby made it clear to Congress that it would not permit such a cap on interest rates. In a compromise to get the rest of the improvements in the law passed and signed by the President (which he did on May 22, 2009), Congress dropped a cap on rates altogether.

Here are the primary provisions of the CARD Act of 2009: (Most of the "new" law is a change to the Truth In Lending Act")

1. There cannot be any more interest increases because your payment is received a day or two after the due date. Further, the increase in rate can only apply to FUTURE uses of the card - new purchases, advances etc. The balance owed at the time of the increase in the rate can only be charged the rate in effect before the change.

2. If there will be an increase for being late, you must be 60 days late, unless there are other issues involved. (The law gives the credit card issuer the right to raise a rate for future use of the card because of factors such as increased risk etc.) Even here however, the change applies to new balances only and there must be the new notice given.

3. Rate increases, in general, must be preceded by a 45 day notice and can apply only to FUTURE balances. It is important to note that the non-retroactivity of increases in rates applies here also.

4. If there is going to be a rate change, other than a change due to your card having a variable interest rate that goes up or down based on an index like the prime interest rate, or the U.S. Treasury rate etc, you MUST receive at least 45 days notice.

5. One major change is that if you or the credit card issuer terminates the card account, you MUST be given an amortization period of at least five (5) year to pay the outstanding balance OR you cannot be charged more than twice the regular minimum monthly payment. You cannot be forced to pay off the balance in a lump sum.

6. Unless you get a low introductory rate (teaser rate), there can be no interest rate increase for the first year. The exception is if you pay more than 60 days late.

7. The monthly interest/finance charge can not be calculated using the prior month’s balance if there has been a payment on that balance before the new statement date. That is a major change as many companies computed interest against balances that had been paid-off during the month.

8. No fee can be charged for going over your credit limit unless you specifically, and in writing, permit the card company to allow charges over your limit. Further, if there is a fee, you can only be charged once in the current billing cycle. So, if you go over limit 4 times during the month, you can only be charged one over-limit penalty fee.

9. If you pay by telephone or over the internet, you cannot be charged a service fee unless the company expedites the payment for you. So, if the payment is normally credited the next day if received after 2pm, but if you pay by a check by phone at 4pm and get the payment credited to your account that day, you can be charged a reasonable service fee.

10. When you make a payment more than the minimum amount due, all amounts over the minimum must be applied to the highest interest rate items in your balance. A simple example: you owe $1,500 for purchases which has an interest rate of 10%, and you owe $1,000 for a cash advance with an interest rate of 15%. You have a minimum payment due of $50, but you pay $200. After applying the $50 minimum payment amount in whatever way the company and you "agreed to" in the "contract", the rest of the payment, the remaining $150, goes to pay down the cash advance because the interest rate being charged is higher than for the purchases.

11 Your statements will be different. Every statement must show the current balance and the interest rate being charged for each type of card use (cash advance, purchase etc). Further an most important, the statement must illustrate how long it will take to payoff your actual balance assuming you make only the minimum payments and what the total cost in interest will be. The same document only also show how much interest you would pay in total if you pay off the card in 36 months (both assume no further card use)

12. Any one under age 21 must have a parent, guardian etc co-sign for him/her unless the under-age person can demonstrate with proper financial disclosures, that he/she has the ability to pay the debt that may be incurred by him/her-self.

As with all laws, the devil is in the details. Here, the details will be set by the Federal Reserve Board which will enact regulations to "fill in the holes", provide definitions like what is the proper financial statements for under 21 borrowers, and what the new statement should look like, and what rules have to be in place for the "reasonableness" of all fees etc.

Finally, certain provisions take effect on 90 days, some in 9 months and some 9 months after the rules are made which has to be done within 15 months. In general ALL of the provisions requiring new notices become effective at the end of August 2009. The others ... hopefully we will have firm dates in the near future.

Author's Copyright by Richard I. Isacoff, Esq., June, 2009

http://www.isacofflaw.com/

rii@isacofflaw.com