The Connecticut Better Business Bureau is urging consumers to become familiar with new rules that take effect Monday that restrict some of the credit card industry’s most unpopular practices.
The changes are part of the Credit Card Accountability, Responsibility and Disclosure Act (CARD) aimed at protecting 181 million cardholders from “any time any reason” punitive rate increases on existing balances and changing the formula for calculating monthly interest payments, to the advantage of consumers.
These and a variety of other restrictions on card issuers will radically alter the relationship between credit card companies and card holders, who, for decades, have been subject to short notice for changes to terms, conditions and interest rate increases, related fees and so-called “fee traps,” such as when the monthly payment due date falls on a weekend.
According to a survey carried out by Creditcards.com, three out of four cardholders do not read the fine print of terms and conditions, the BBB said. Although the CARD legislation provides more protection for consumers, cardholders nonetheless must familiarize themselves with fine print, watch for changes to their accounts and respond quickly if they are not satisfied.
Connecticut Better Business Bureau President Paulette Scarpetti says cardholders also should familiarize themselves with the legislation’s provisions.
“Better Business Bureau views the legislation as a positive change for the marketplace,” Scarpetti said. “The CARD Act puts into place new protections for consumers and forces card issuers to be transparent about fees, penalties and interest rate increases, while requiring them to provide information in clear, easy-to-understand wording.”
Here are a few of CARD’s new regulations and how they protect consumers:
More Notice for New Interest Rate Changes: Card issuers must give card holders 45-days advance notice in the event of an interest rate increase. Additionally, promotional rates must apply for at least six months and, unless disclosed up front, card holders cannot have their rate increased in the first year.
Cardholder Opt-Out:Â If there are significant changes made to the terms of the account, card holders can choose to reject those changes and will have five years to pay off the balance under the original terms.
Older Age Restrictions Added: Card issuers are no longer allowed to issue a credit card to anyone under 21 unless they can prove they have the means to repay debt or if an adult over 21 co-signs on the account. Credit card companies also face new restrictions on how they can promote cards to college students and can no longer offer free gifts as enticements on campuses.
New Rules for Monthly Statements: In response to complaints that bill due dates were being moved up-and leading to increased late fees-monthly statements must now be mailed or delivered 21 days prior to the due date. Additionally, card issuers can no longer set a payment deadline before 5 p.m. and cannot charge card holders if they pay online, over the phone or by mail-unless the payment is made over the phone either on the due date or the previous day.
Overpayments Go Toward Highest Interest Balances: If the card holder has varied interest rates for different services or accounts, any overpayments must be applied to the account that is incurring the highest interest rate.
To learn more about the new consumer protections, visit Creditcards.com for a comprehensive breakdown of the Credit CARD Act of 2009. More information on wise management of finances can be found at bbb.org.