Due to recent surges in the number of Americans filing for personal bankruptcy, Congress is attempting to create legislation which increases corporate transparency to protect consumers from unfair fees. One such legislative act is the Credit CARD Act of 2009, which was recently passed by the House of Representatives and will take effect in February 2010.
What will the Credit CARD Act do, exactly?
This new piece of legislation is designed to prevent some of the sneaky ways that credit card companies' spike your debt. Thanks to this new law, look out for the following changes:
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o Currently, credit card companies apply your payments to the debts which are accruing the least amount of interest. By doing this, they profit by maintain debts with super high interest rates. The CCA prohibits this. Instead, payments will be applied to debts with the highest interest rates, making it possible for you to pay off debts quicker by paying less interest.
o Credit companies will no longer be able to apply increased interest rates to old debts. Currently, if you are delinquent on any payments, they are allowed to increase your interest on all accounts and all debts. After July 1, increased interest rates will only be applied to new debts.
o The current system allows credit card companies to change consumer policies without notice and for no reason. In some cases, these changes can be applied to plans two months prior to notification. This new law stipulates that consumers must be notified 45 days before changes take place. This will enable consumers to change policies, use reward points, or make payments when it is advantageous.
o Consumers will not be allowed to overspend. Currently, consumers are charged around $39 every time a customer spends more than their credit allows. These fees add up and accrue interest. New legislation will not allow consumers to overspend. Instead, their cards will be cut off when they have reached the limit.
o No one over the age of 18 will be issued a credit card without a cosigner. Right now, thousands of college kids sign up for cards and find themselves in debt up to their eyeballs. Now, you must be 21 to sign up without a cosigner.
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