Credit card companies have long been greasing the wheels of government with high priced lobbying, but in 2009 Congress struck a blow for the common man (and woman) – you know, the ones that actually voted for them. Few people know about the Credit Card Accountability Responsibility and Disclosure Act of 2009 and that’s exactly how the credit card companies would like to keep it, but this act puts the power back in the hands of the people and makes credit card companies accountable for their actions.
Follies of Youth
Most college students would likely contemplate selling a kidney if it meant a free pizza on Friday night. Money is tight and college cafeteria food is barely edible. It used to be that students going to sporting events or even walking around campus would be greeted by friendly credit card company reps who were passing out free stuff, from frisbees to t-shirts (letting laundry day wait one more day), just to get the students to fill out an application. It didn’t take long before thousands of college students had a lot of free shirts and a ton of credit card debt.
Credit card companies preyed on these groups because students were impulsive and an almost-sure money-maker. The credit card industry knew there were plenty of minimum payments and tons of interest to be collected from the free pizza generation. The Credit Card Accountability Responsibility and Disclosure Act of 2009 took away the credit card companies’ ability to market on campuses, much to the chagrin of dirty-shirted and hungry college students everywhere. You can’t even get a credit card before you’re 21 anymore, unless you can prove you have income or have a co-signor. Credit card companies also can’t visit a sporting event or other venue to entice new customers without a valid reason for being there.
Interested in Interest
Credit card companies once had the ability to raise a person’s interest rates for almost any reason. Miss a few payments? Default on a previous credit card? Wear white shoes after Labor Day? Ok, so a fashion faux pas is a little exaggerated, but many people found their interest rates rising with little or no warning. Your interest rate could jump by 18 points over night, and you were left holding the bag.
The Act has several provisions to protect the public from unreasonable interest rate increases. Companies now have to give 45 days notice before raising rates, so you can decide whether or not you want to keep the card. That 45 days is designed to give you time to pay off and close the card without incurring the new interest rate. It also keeps them from retroactively using the new rate on a balance in good standing.
We’ve all made credit mistakes, and credit card companies were taking advantage of that to increase rates if you were late on your payment by so much as a minute. The Act protects consumers by requiring a 45-day notice for increases in rate and, if you make six months of consecutive on-time payments, then your interest rate must be lowered back to the rate you had before the missed or late payments.
The main downfall of the Act is that it did not set a cap on interest rates. This means companies can still charge upwards of 30, 40 or even 50 percent interest if they want to.
Fees! We Don’t Need No Stinking Fees.
Credit card companies seem to have a fee for everything. There were late fees, over the limit fees and you-ate-too-much-chocolate-on-Thursday fees. The Credit Card Accountability Responsibility and Disclosure Act of 2009 gave credit card companies rules about when they are allowed to charge fees. Before the Act, if you got your payment in too late at the post office or went one cent over your limit, they took the opportunity to rake you over the coals.
Now, credit card companies can only charge an over-limit fee for three consecutive billing cycles. Also, payments made on the payment date before 5 p.m. cannot be charged a late payment fee.
Credit card companies are complying with the law, but they are counting on consumers not knowing about their rights. Grab the credit bull by the horns and turn your credit score around by exercising your ability to take control thanks to the Credit Card Accountability Responsibility and Disclosure Act of 2009.