Wednesday, December 28th, 2016

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Legislation Limiting Credit Card Companies

A consumer-friendly credit card bill has passed the Senate and the House and is now headed to President Obama.

The bill included a measure to insure that payments be applied first to the portion of a credit card bill that carries the highest interest rate. That may sound like common sense but credit card companies are currently allowed to force a consumer to pay off other parts of his or her bill before allocating it to the principal with the highest interest rate.

Edward Yingling, president and CEO of the American Bankers Association, said it could "undermine the availability of credit" by restricting individual institutions’ ability to price credit against risk.

What’s in the bill?
Here are just a few of the provisions in the new credit card reform bill. To see a complete (easy-to-read) list look here: http://www.msnbc.msn.com/id/30846334/

• Credit card companies can’t raise interest rates for the first year an account is open, unless the increase is under a variable interest rate, at the end of a promotional period, or the cardholder is 60 days past due.

• 45 days’ notice required for a rate hike. No notice is required for any reason stated above.

• No over-the-limit fees (except for cardholders who sign up for programs allowing transactions that would put them over their credit limit). An over-the-limit fee may be imposed only once per billing cycle and only if the balance is above the limit on the last day of the cycle.

• Everyone under age 21 must have a cosigner or proof they can pay their bills to get a credit card. Credit limits can’t be raised without signed approval from the co-signer.

• Credit card companies can no longer send prescreened card offers to anyone under 21 unless they have previously consented to receive the offers. Gifts can’t be offered in exchange for completing a credit card application on any college campus. 

• Card bills must explain how long it would take to pay off the balance and how much interest would be paid by cardholders who make only the minimum monthly payment.

• Credit card companies can’t raise interest rates on existing balances unless the increase is under a variable interest rate, at the end of a promotional period, or the cardholder is 60 days past due.

• If you have an existing balance the credit card company can’t change the terms unless they are offering you five years to pay off the outstanding balance at the old rate; or an increased minimum payment that has no more than twice as much of a contribution to paying down the balance as the old minimum payment.

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