When the economy went into a recession in 2008 the Federal Government took an initiative to try to protect consumers. The increase amount of house foreclosures has dropped and the economy is slowly recovering the American people are still in debt. A single person on an average is $3,200 in debt while a household average is approximately $8,300.00 in debt. The Federal Government has helped many families with passing new legislation which started in 2009.
New Legislation Was Needed
The Credit Card Act was signed into law and credit card companies had nine months to implement it by February 22, 2010. The federal government passed this reform to help the consumers who were constantly in debt, but paid their bills on time. The Credit Card Act is there to help us so major credit card companies and lenders do not take advantage of us the consumer. The consumer needs to be aware of the reform or The Credit Card Act in terms of what credit companies are now allowed to do when it comes to the high debt.
The Credit Card Act focuses on several facets with the way credit card companies and lenders process interest rates and fees. The credit companies will need to follow the known Credit Card Accountability, Responsibility and Disclosure Act, which many consumers receive with a new credit card. The credit companies are required to do the following regulations:
- Card companies are prohibited from using a universal default on consumers along with not being able to increase a card holders interest rate on any existing balances based on undesirable information not related to how the card is being used.
- The Credit Card Act prohibits lenders and credit companies raising interest rates retroactively on accumulated balances unless the cardholder is more than 60 days late when paying a bill.
- The law or act requires card companies to mail bills at least 21 days before the due date. Also if the credit card payment is considered to be paid “on time” when it is paid before 5:00 p.m. on the due date. This may change if the due date occurs on a Sunday, National holidays or other days that a business or company does not receive the mail. The mail payments are received on the next business day.
- The Credit Card Act prohibits credit card companies and lenders from charging any fee for a payment method and over-the-limits which card members set. The only way this is allowed is through having an expedited service provided by a service representative or affirmatively agrees to any transaction.
- Credit companies and lenders are required to provide advance notice within a 45 day or less time frame of any changes in their credit card terms.
- Credit card lenders, companies or financial institutions are prohibited from giving and authorizing extended credit to consumers who are younger than the age of 21. This was done to try to stop the ongoing targeting and marketing of college students that are usually id debt from loans. The exception is if the person as a consumer can show the ability to make the necessary payments or provide a co-signer when the credit card is issued to them.
- Credit card companies and lenders have to provide consumers clear explanations of the minimum payments in each monthly statement. The credit card companies also are required in detail on each monthly statement to provide the consumer a time frame on how long it will take to pay off the credit card debt if only the minimum payment is made and the combined interest that will pay until the debt is paid off. The statement must also include the amount which is needed to pay on the monthly balance if the consumer wants to pay the balance off in three years. Consumers will find by paying just a little more on the minimum payment can make a difference in the long run as long as they learn to manage and budget their money.
- The Credit Card Act prevents credit companies from charging consumers the unnecessary annual fees, account protection plans and finance charges especially if the account is near the limit.
- The Credit Card Act, according to Title 1, Section 104 states that lenders and credit companies that any distributed payments made are to be applied to debt with the highest interest rate particularly on cash advances.
Consumers Need to Know
The federal government passed this law to help consumers be treated fairly by the numerous credit card companies and financial lenders. Although on several occasions the Federal Reserve has stopped several loopholes in the legislation so that financial establishments can no longer take advantage of the consumer. The one thing consumers will need to remember is that, The Credit Card Act is there to help them. If a consumer knows any lender or Credit Company that has not followed through with any of the requirements, they can contact the Attorney General, the Better Business Bureau and other federal organizations.