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News
New
Protections
for Credit Card Consumers
Posted 23 February
2010
A federal law passed last year to give consumers more credit card
protections finally takes full effect Monday.
“The law contains some very important new protections,” said Iowa
Attorney General Tom Miller. “But some of the old consumer tips remain
just as important now as before. Shop around for the best card. Read
your billing statements every month. Read other notices that might
indicate they are changing your credit card terms,” Miller said.
“And always try to pay off the entire balance or as much of it as you
can,” Miller said. “Don’t just pay the minimum, or you never will get
out of the debt trap.”
Some key terms of the new federal “Credit CARD Act”:
Limits on interest rate increases:
- Credit card companies
must give you 45 days’ notice of any significant changes in your card
terms, including your interest rate, and the interest rate on a new
card cannot be increased in the first 12 months (unless an introductory
rate is expiring or you have a variable interest rate card.)
- Card issuers may not
increase rates retroactively, on existing balances, unless you are 60
days late on a payment.
- Card issuers may not
automatically raise your interest rate if you are late paying on
another company’s bill or payment.
“Consumers still will
need to shop around for cards with the best interest rates, because the
new law puts no cap on interest rates,” Miller said. “And they will
need to study their bills and other communications from their card
companies to be sure they notice if the company plans to change key
terms on their account.”
Card companies must provide more credit card billing information:
Card bills must tell how long it would take to pay off your balance if
you only make minimum payments, and how much you would need to pay each
month to pay off your balance within three years.
“I hope this is a real eye-opener to help consumers avoid the debt
trap,” Miller said. “It should make it very clear that paying only the
minimum is a recipe for huge expenses and mounting debt.”
The Federal Reserve rules issued recently to implement the Credit CARD
Act gave an example of how a minimum-payment disclosure might look. If
you owe $3,000 and your interest rate is 14.4%, and you make no
additional charges, and you make only a minimum payment of $90 per
month, then it would take 11 years to pay off the balance and you would
end up paying an estimated total of $4,745.
Credit card companies are now limited in marketing to students:
Credit cards may no longer be issued to anyone under age 21, unless the
applicant can show adequate income or has a cosigner who is over 21 and
is willing to be liable for any debts. And companies may no longer
offer “free” items to students to get them to sign up for a card on or
around campus, or at a college-sponsored event.
“We know that students very often fell into the debt trap, in part
because cards were promoted heavily to them without any real checking
on their ability to pay,” Miller said.
“These are just some of the most helpful terms,” Miller said. “But
consumers still have a huge responsibility to take advantage of these
rights and to make smart decisions.” He encouraged people to go to the
AG’s web site – www.IowaAttorneyGeneral.gov
– for more information, including a link to the Federal Reserve’s full
summary of the new law (also found here.)
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