On Aug. 22, a year of credit card reform culminated with the enactment of a final set of new credit card rules. The last set of rule changes sets out to limit late payment charges and other scams disguised as penalties. Charge card reform began with the Charge card Accountability, Responsibility and Disclosure (CARD) Act of 2009. As of Sunday, all the new guidelines collection forth within the legislation have now been enacted. Late payment charges can’t exceed $25 under one for the newest federal laws.Over the past year as new credit card rules have been rolled out, credit card companies have been dramatically increasing interest rates. Within the last round of new guidelines, a provision demands the creditors to provide to evidence to federal regulators supporting the legitimacy for those increases . Source for this article – Last round of new credit card rules limit late payment fees by Personal Money Store.
Obtaining overdue fees and penalties as well as interest rates under control
Now the cycle of credit reform is complete, consumers may have to pay no more than a $25 penalty for overdue obligations. Card companies are also prohibited from charging customers for no using their card, and also rate of interest hikes over the past year have to be justified. CNN reports that credit card corporations must cut rates of interest if the reasons they claim for the increases no longer apply. Credit card businesses could be held to account by government regulators assigned to evaluate their justifications. However, the new rules give banks wiggle room to hike penalty fees higher than $25 if a cardholder is habitually late with payments or if the credit card company can prove the high fee is justified to offset the cost with overdue payments. Further checks on penalties consist of a rule preventing past due charges from increasing above the minimum payment, or overdue costs totaling more than the dollar amount charged over the credit line.
Charge card corporations plan to recoup lost gigantic amounts
The latest round of new credit card rules could subtract $3 billion a year from credit card business bottom lines. Reporting on the industry response to new restrictions, the Wall Street Journal said that fees on balance transfers, money advances, overseas transactions and annual costs are already rising. Because of the new rules, credit card businesses are also expected to raise monthly minimum payments due, which would enable them to increase the late payment penalty fee. Banks accustomed to reaping huge profits from penalty fees aren’t letting go very easily . An executive quoted within the Journal piece said that credit card businesses will miss the easy pickings. They took away about $11.4 billion for their customers’ money last year by hitting them with past due fees. That figure is expected to drop 29 percent to about $8.1 billion.
Consumer spending plays into card-issuers’ hands
Rates of interest are raised by credit card businesses to combat the added consumer protection provided by the new credit card rules. A separate CNN story on the subject said that interest rates on existing credit card customers swelled to a 14.7 percent average within the second quarter-13.1 percent higher than 12 months ago . The gap between the average credit card rate of interest and the prime rate is presently 11.45 percentage points, the widest margin in 22 years according to Synovate, the market research affiliate of Aegis Group. The high rate of interest has not deterred consumers. Within the second quarter their charge card use rose to the second-highest level ever.
Further reading
CNN
money.cnn.com
Wall Street Journal
wsj.com
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