Many of the Credit Card Act of 2009, or the Credit Card Act, will go into place in 2010 to protect the consumers from excessive banking fees and practices from banks and credit card issuers. While the new rules will protect the consumers from some fees and charges, they may force banks and lenders to create new ones.
It is estimated that the banks will loose around $50 billion due to the rule changes of the Credit Card Act and other proposed changes. Many of the banks have already tried to increase interest rates on credit cards, switch fixed rates accounts to variable interest rates accounts, reduce limits and even close accounts where they can before more of the new rules go into place in February.
Some banks are looking to new fees not addressed by the Credit Card Act and other rules to help make up for the loss of revenue. Some of these changes are: processing fees for items such as paper statements, inactivity fees, annual fees on credit cards, increased fees on safe-deposit boxes and stop-payment on checks.
Many banks are also looking at changing rewards programs on some of their accounts and cards. Eliminating free checking or increasing the requirements is also being considered by many banks.
Some of these changes will increase the burdens that many of the reform changes going into effect in 2010 are trying to reduce. For example, the inactivity fee will make it hard for those that are trying to pay down their credit card debt since to avoid the fee the card holder would have to continue to use their card and add to their balance. The fastest way to get out of credit card debt is to stop adding charges to the card.
There is some good news for banking and credit card consumers in 2010. The next phase of the Credit Card Act goes into effect February 22nd.
With this phase there are greater restrictions on interest rate increases. A card issuer cannot increase the interest rates on a credit card unless it is 60 days past due.
Also starting in February, the consumer must give the credit card company permission to process transactions that would take their balance over their credit limit. The card issuer cannot access an over-the-limit fee without this permission.
Other changes starting in February has to do when a credit card payment is due and received. If a payment due date falls on a weekend or a holiday, then the credit card issuer must accept the payment on the next business day without treating it as being received late. Also, all payments received by 5pm must be credited that day and not pushed back to the next day causing a late payment issue.
Additional consumer protection goes into place when another phase of the Credit Card Act goes into effect in July. If the interest rate on a credit card is increased due to the payment being 60 days late, the credit card issuer must then change the rate back to the original interest rate if payments are made on-time for six months.
Also, in July there will be new rules to limit fees on gift cards. The final phase of the Credit Card Act will occur on August 22nd.
Another rule that has been passed will change overdraft protection for many consumers on their bank accounts. Consumers will have to give their consent by July 1st before the bank can automatically enroll them into an overdraft protection program and charge fees for when the overdraft is used.
There are also changes coming as to how credit bureaus market free credit reports to consumers. The Federal Trade Commission (FTC) must submit new rules on how companies such as Experian, Equifax and TransUnion market free credit reports.
These companies currently only give out the free credit report after the consumer signs up for their monthly service. In many cases the consumer does not realize they have signed up for the service.
The changes from the Credit Card Act of 2009 that goes into effect in 2010 will protect consumers from excessive fees and practices from the banks. Consumers will have to be watchful for new fees and charges from the banks as they try to make up for the loss in revenue from these changes. Congress will need to look at these new changes from the banks to see if more consumer protection needs to put into place.
Written by Denise Clay
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