Posts Tagged ‘barack obama’

In a bid to protect consumers from fluctuations in credit card interest rates, the Federal Reserve has issued new credit card rules.

Beginning February 22, credit card companies can no longer increase their rates within the first year after the account is opened. These companies are then required to give credit card holders a 45-day notification if they are planning to increase their rates after the first year.

According to American Banker’s Association, these new rules are the most comprehensive ever implemented and can really help consumers to manage their credit card debt.

Under the new rules, credit card providers can only charge fees on the credit card holder for transactions that exceed his or her credit limit after obtaining the consumer’s consent. Another notable provision in the law is that the companies will be thwarted to issue credit cards to individuals under 21 unless they have the financial capability to repay their debts or a co-signer can make the required payments if the cardholder failed to do so.

Confusing billing processes and cut-off periods can be prevented as due dates will be the same month after month. Initial payments will be applied to balances with the highest interest rates, which will help cardholders pay their debts easier and at a cheaper cost.

Consumers will be glad to know that there will be no rate increases for their existing credit balance – except when they fail to meet their payment 60 days after the due date.

As these new rules are set to be implemented next month, some lenders are already pushing through rate increases this month, getting the ire of the Congress who passed the legislation and was signed by President Barack Obama in 2009. Other provisions of the law are said to be implemented later this year.

Writer: Rowell

With several other laws of the Credit Card Act still yet to come into full effect until February 2010, credit card companies are projected to cost millions of dollars in projected profits. Thus, for customers in the midst of the Christmas season, consumer groups urge credit card holders to be wary of last minute hikes in their interest rates.

Though such a reaction to the holiday shopping spree is the best that companies can do to compensate for their losses within legal boundaries, Montrice Godard Yakimov, Managing Director of the Office of Thrift Supervision under the US Department of the Treasury, in a memo released after President Obama’s approval of the Credit Card Act, warns against unfair practices which companies in the past were found guilty of.

Yakimov expressed that while the government requires that “consumers receive a reasonable amount of time to make their credit card payments”, guilty parties were found to have “prohibited payment allocation methods that unfairly maximize interest charges and, in the subprime credit card market, limited fees that reduce the credit available to consumers.”

Yakimov urged CEOs of credit companies that consumers with a track record of paying credit card bills on time should be given the incentive of not raising the interest rate on an existing credit card balance. This recommendation may be easier said than done.

Since President Barack Obama signed the Credit Card Act into law in May to safeguard consumer rights against deceptive and unfair arrangements, especially for credit card holders and interested applicants, the policy has been met with lesser customer-friendly policies coming from the credit card companies themselves.

Since mid-August, companies which issue credit cards reacted to the policy with stricter policies against provisions such as the requirement that issuers provide 21 days for consumers to pay their credit card bills, and the requirement that issuers provide 45 days notice of changes in terms.

Time will tell as there are several other key provisions effective on February 22, 2010 in the Credit Card Act are anticipated to either make of break the affected credit companies which may either draw in more volumes of credit card ownerships and more efficient payment or severely increase the difficulty of acquiring new credit cards.

The fill force of the provisions include the following: (1) enhanced disclosure of card terms and conditions, (2) fairness in the timing and application of card payments, (3) responsible lending, (4) restriction of certain fees and interest charge, (5) prevention of unfair increases in interest rates and changes in terms, (6) strengthening oversight of credit card industry practices, (7) safeguards for young people who obtain credit cards, (8) enhanced penalties; and (9) gift card protections.

Writer: Anthony

United States House Financial Services has approved a proposed bill expediting the implementation of CARD Reform for Consumers Act of 2009, a law which overhauls the credit system that is supposed to be carried out on February 2010, on December this year.

On the other hand, the HR 3639, the Expedited CARD Reform for Consumers Act of 2009, does not apply to prepaid gift cards – which are already printed and will be out in the market soon, and small credit card issuers – which control less than 2 million cardholder accounts. The credit reform law will be effectively implemented on small market such as these on February 22, 2010.

Meanwhile, Senate Banking Committee Chairman Sen. Chris Dodd recommended the immediate termination of increased interest rates set by the card issuers.

These actions by both legislative houses were prompted by the continued increase of rates for 700 million credit card holders.

Comparing last year’s rates, cardholders complained that they have been paying four times higher in interest rates due to charges on late payment and other additional fees.

In a recent study conducted by Pew Charitable Trust, a non-government organization which is committed to serve the people by improving public policy through information dissemination, they found out that contracts for almost 400 cards, issued by banks and 12 largest credit companies, allow card issuers to raise interest rates, apply penalty fees for late payments or over-limit transactions.

These terms are the same policies prohibited under the CARD Reform Act, which was signed into law by President Barack Obama early this year. The Congress has divided the implementation of the law into two phases to give credit card companies more time to change their policies. The first phase, which was implemented last August, entitles the consumers a 45-day notice from the card companies and banks before changing their interest rates. The second and last phase, which is supposedly carried out next year, bans the card issuers to increase their interest rates on existing balances. The law also gives the consumers five years to pay the loan that has fixed interest.

However, instead of adjusting their policies to meet the reform act requirements, the banks, which control more than 90 percent of credit cards in the marker, and credit card companies have changed and rewrote contracts to their advantage. As a result, credit card issuers have free-hands in increasing their interest rates and eventually raking more profits at the expense of their consumers.

In fact, the credit card companies have started increasing the median annual rate in December 2008 and July this year by two percent or more – one of the measures that will cover the projected losses due to continued climbing of unemployment rate and the implementation of CARD Reform Act.

Other measures adopted by banks and credit card companies are re-pricing program which is forcefully employed to its existing consumers, some of them have cut their rewards programs, and applying additional charges for annual fees, between $29 to $99.

Writer: Gani