credit card act
How to reduce Credit Card Interest Rate
The Credit Card Act has provided a great deal of added protection for consumers in the use of credit cards and the manor in which banks can market to its customers. However, one area that was not addressed was limiting the rate that can be charged after proper notice is provided to existing customers. As a result, many consumers have found that just trying to stay current on their credit card payments is very difficult, especially when you try to pay back the amount that you charge each month. The reason for this is that the past debt with its interest payments tends to increase each month through negative amortization.
There are a number of ways to reduce your inertest rates. However, one way that will work very well for those high rate cards, which consumers typically do not use any longer, but do carry significant balances is to negotiate with your credit card company on the rate based upon some consideration the consumer can provide. For example, you may want to propose to not use the card any longer, but just pay back the principal and interest currently owed to the creditor. In consideration for that, ask if the credit card company will reduce the interest rate. This in affect will shut off your credit card, but at the same time, allow you to pay the debt down.
The key to negotiating to pay and not use the card is to not harm your credit rating or FICO Score. The reason being, you do not want other creditors to reduce your limits or raise your interest rates based upon a reduction in your credit score. The question then begs to be asked, how will such an arrangement be reported on your credit report? It is imperative that when negotiating with the Credit Card Company, you require them to continue to report your account as open and current. This type of negotiation is not a debt settlement, and you are not proposing to pay any less then 100% of the unsecured balance. All that is happening is the Credit Card Company can take solace in knowing that the consumer poses no additional risk to incur fees that can not be paid back
Changing laws on mall gift cards
Have you ever received a gift card for the mall or one of those pre-paid Visa or MasterCard, only to find out when you tried to use them that the card has expired, or due to the length of time, much of the funds were not available for your use? This is an unfortunate occurrence for many consumers. However, as of August 22, 2010, the Federal Credit Card Act has established a new set of rules and regulations relative to gift cards. The specific issues this new law tackles is relative to limiting penalty fees and rate increases, and expiration dates not listed on the card.
There are several key changes to the law as it relates to these gift cards and gift certificates is that the law limits the expiration date to five years from the date of issue. So even if you have a card that indicates it is only good for a year, the issuing company will have to provide you with a new card should such a printed expiration occur less then five years from the date of purchase.
Additionally, just because you receive a gift card, does not mean you must use it right away or loose some of the value due to inactivity or service charge fees. More specifically, there must be no activity for over one year before such penalties can be assessed and even then only once per month can any funds be deducted.
Perhaps the most important aspect of the new law is the requirement for explicit written disclose of any penalties for certain uses on the face of the gift card. In addition, the contact information for the issuing company must be clearly identified on the card, so that should the user have any questions about any loss of funds, there is an indication of the proper company who is ultimately responsible. It should be noted though that cards produced before April of 2010 can still be sold on the open market until August 1, 2011.
The bottom line is that as consumer’s and as gift givers, we are all protected against the big banks and other Creditor’s selling us a bill of goods that can not be used for its intended purpose any longer.
Consumer Protection Laws
There are a number of consumer protection laws which protect you from creditors taking advantage of you or misrepresenting information. The following is a short description of the most important credit laws:
The Fair Debt Collection Practices Act
is the federal law that dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m., or while you’re at work if the collector knows that your employer doesn’t approve of the calls. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to stop further contact.
Fair Credit Reporting Act:
Cconsumers are able to receive one free credit report a year, and can verify what is reported about them. The free report can be requested by telephone, mail, or through the government-authorized website, annualcreditreport.com.
Truth in Lending Act
The Truth in Lending Act was created to protect consumers in credit transactions, by requiring clear disclosure of key terms of the lending arrangement and all costs.
The purpose of Truth in Lending is to promote the informed use of consumer credit, by requiring disclosures about its terms, cost to standardize the manner in which costs associated with borrowing are calculated and disclosed. The act also provides consumers the right to cancel certain credit transactions that involve a lien on a consumer’s principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes.
Understanding the new credit card laws
Credit cards, if used properly, can be useful and convenient tool, and can even help build a strong credit score that will assist you with future borrowing. However, owning a credit card makes it easy to spend money you don’t have and when the interest is taken into account, consumers can build massive debt. According to The Nilson Report, April 2009, In the average American owed $10,637 in credit card debt. The U.S. Census Bureau reported that credit card debt is growing and predicted that about 181 million Americans would owe credit card debt by 2010. That figure is up from 163 million Americans in 2008. As a nation we have become a plastic society, using our credit cards instead of actual money in our pockets.
The Credit card companies understand the temptation that has been provided to their clients and in the past have made it extremely easy for consumers to obtain credit cards. Recently, these same credit card companies have significantly increased interest rates, decreased spending limits and targeted young consumers with little experience managing their own finances. In order to combat this practice, the Federal Government has recently passed the Credit Card Accountability, Responsibility and Disclosure Act which will take effect in February 2010.
There are many sweeping changes to the way credit card companies conduct business. the following are some of the key changes including restrictions on raising interest rates permanently on borrowers who are delinquent 60 or more days. If the Consumer pays on time for 6 straight months, the credit card interest rate must be reinstated to the original lower rate.
The new law also requires that the advertised low interest rates must have a minimum 6 month period of time and prohibits increased rates in the first year a cardholder has a new account. This is important because it limits the Consumer’s liability on initial purchases.
The law also addresses late fees and penalties for paying your bill by phone, mail, or online and makes it unlawful to access additional fees to accept payments in this way. In the past, if a consumer wanted to pay at the last minute by phone, they would have to pay an extra fee, which is not lawful any longer.
Finally, the law also includes several measures aimed at protecting young consumers and college students, who until now have been blindsided with offers of easy credit. The law requires that consumers under the age of 21 will now be required to have co-signers, such as parents or other adults over the age of 21, who will take on joint liability for any card debts that are incurred. This will essentially end the marketing campaigns on college campuses. “Young people thrown on college campuses can be extremely vulnerable to these practices,” says Brad Lazarus, principal at Omega Advisors, a Chicago financial planning firm. Some credit card companies offer students nominal gifts, free food or free T-shirts just for applying. But the Credit Card Accountability, Responsibility and Disclosure Act makes this practice unlawful at application sites on or near college campuses. As an additional protection of the most vulnerable consumers under the new law, credit reporting agencies can’t provide the credit reports of under-21 year old consumers to credit card companies unless the consumer specifically requests that they do so.
