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CARD Act Protecting Buyers From Unfair Policies Finally Takes Effect

February 23, 2010

As Costa Mesa debt settlement attorneys, we have been guardedly optimistic about the CARD Act for some time. This credit-card reform bill was passed last year and some of its provisions took effect in August, but the remainder became active Feb. 22. According to an article by McClatchy Newspapers, the law may help consumers avoid some of the most costly deceptive practices by credit card companies. However, other abusive practices remain unchecked, and credit card companies have already raised their rates to compensate for anticipated losses.

As of last August, credit card companies could not raise interest rates without 45 days' notice, and had to send bills at least 21 days before the payments were due. This week's new provisions add to those protections considerably. Companies may no longer raise customers' interest rates on existing balances until a bill is at least 60 days overdue. If a cardholder pays on time for six months after this happens, the credit card company must drop the interest rate back to its original size. Among other things, this will stop the practice of "universal default," in which a credit card company raises rates on all cards because of a late payment on one card. The article estimated that this alone will save U.S. cardholders $10 billion a year. Other provisions include:

  • A requirement to get permission before allowing cardholders to spend over their credit limits.
  • A prohibition on a practice called "double-cycle billing," in which the credit card company charges interest on the average daily balance over the past two months to determine the interest charge, rather than using the current month's balance.
  • A requirement to put any payment over the minimum payment toward the balance with the highest interest rate. This applies only when there's more than one balance, of course.
  • For cards with a high annual fee, a limit on that fee in the first year to no more than 25% of the total credit limit.

When the Act was passed, our Fontana debt settlement attorneys were disappointed that it didn't go further. Nonetheless, we believe this will help many credit-card holders avoid becoming financially entrapped by provisions that they didn't expect and had little way to learn about. Double-cycle billing, for example, was perfectly legal before the CARD Act, but not at all intuitive and arguably deceptive. By reducing that kind of deception in credit card lending, the law will give people fuller information with which to make good decisions about their money. It will also reduce the amount of money companies can charge their customers, which will slow the growth of debts. In the long run, this may actually benefit credit card companies, because it may keep their customers from getting so deep into debt that they're forced to file for personal bankruptcy.

Howard Law PC offers debt settlement services (or consumer bankruptcy services) for people throughout California who know they're in debt over their heads. Especially because the economy is bad, credit card companies and other creditors are frequently willing to forgive the debt in exchange for a partial payment. That may sound strange, but it allows creditors to avoid losing all of the money owed if the debtor is forced into bankruptcy. Our Norwalk debt settlement attorneys help clients negotiate these deals with their creditors and make sure that the transaction will end the debt once and for all. If necessary, we will also take legal action against a creditor that illegally continues to bother you once the debt is extinguished. And we provide counseling on the effects of the debt forgiveness for your taxes and other areas of your financial life.

If you're deep in debt and you know you need to take action, don't hesitate to call Howard Law for help. To set up a free, no-obligation consultation, you can send us a message online or call 1-800-872-5925.