New rules have been proposed by the Federal Reserve for the implementation of the Credit Card Accountability, Responsibility and Disclosure Act. The proposal offers greater protection to Americans applying for new credit cards or struggling to pay off existing credit card debt. When implemented, the rules will:
- Prohibit banks from increasing the annual percentage rate and some fees on existing credit card balances except in certain limited circumstances. Banks must also allow the credit card user to pay off existing balances over a reasonable period of time.
- Prohibit banks from increasing the annual percentage rate on new accounts opened in the past year. This offer greater protection for those taking advantage of low introductory rates then finding themselves with the inability to pay off new charges within the introductory period.
- Require that banks no longer be allowed to apply payment amounts over the minimum payment in any way that increase the amount of interest charged the credit card user.
- Mandate that credit card users must be provided the full benefit of any promotional interest rate by applying payments over of the minimum payment to higher interest rate balances first. Banks must provide a grace period for purchases for which the consumer would be eligible if a previous balance did not exist.
- Forbid the issuance of credit cards to persons under 21 years of age unless they have a proven ability to pay or have the protection of a legal co-signer.
- Mandate that credit card companies obtain a card user’s permission before charging fees or transactions that will cause the user to exceed their credit limit
The proposed changes are good news for those who must rely on credit cards and are having a difficult time paying down their existing debt. The changes are expected to take effect in February 2010. If you are seeking debt consolidation help or advice then fill out the form on the left to talk to a counselor.
Tags: credit card debt, Personal Debt
