This is the third installment in our series on the Credit C.A.R.D. Act of 2009. In our first installment, we looked at the major portions of the bill and how they would affect consumers. Next, we look specifically at the new regulations regarding consumers under the age of 21.
Now we will take a look at the new requirements regarding the notifications and disclosures sent to you from the credit card issuers.
45 Days Notice for Rate Increases and Other Significant Changes
Credit card issuers are now required to give at least 45 days advance notice of rate increases and other significant changes (including changes to any fees or finance charges) to the agreement. Included in this notice must be the option for the cardholder to close the account without penalty. If the account is closed, the cardholder will not be required to pay off the entire balance at once, but instead will be allowed the repay the balance under the old terms and conditions. Please note that this law went into effect on August 20, 2009, rather than February 22, 2010 as with most of the regulations.
Warnings About Minimum Payments
With each statement, card issuers will now have to show the time it will take to pay off the balance due if you only make the minimum payment each month. They must also include the total amount you will pay, as well as the amount going strictly to interest. They must now also tell cardholders how much they must pay per month in order to pay the balance in full within 36 months.
In addition card issuers are also required to include warnings with each monthly statement alerting cardholders to the fact that making only the minimum payment will extend the amount of time it takes to pay off the balance as well as increase the amount paid.
Penalty Interest Rates
Credit card issuers must tell cardholders if the next late payment – or consecutive late payments – will result in a penalty interest rate taking effect, and what that penalty rate will be. This notice must appear on the monthly statement near the due date.
Right to Opt Out
This simply means that if your card issuer makes significant changes to your agreement, such as changing the interest rate or fees, you have the right to cancel the card and pay off the remaining balance under the old term and conditions (including rates and fees). In the past, many consumers were given this option when changes were made to their accounts; however, this was always at the discretion of the card issuer. Now, under the Credit CARD Act, it is a basic right of every cardholder.
If a consumer chooses to cancel the card due to changes in the account agreement, the credit card issuer has several options in requesting repayment of the remaining balance:
- Allow the consumer to repay the balance under the old terms and conditions
- Give the consumer at least 5 years to repay the balance
- Increase the minimum payment amount by up to twice as much as under the old agreement
Immediately after opting out of your card agreement, the account is no longer available for new purchases, and once the balance is paid in full the account is completely closed.
Please note that there are two cases in which you do not have the right to opt out of increases.
- An increase to the minimum payment amount. If your card issuer raises your minimum payment amount from 2% of the balance to 4%, you do not have the right to opt out.
- This is because an increase in the minimum payment amount is actually beneficial to you since it will cause you to pay off your balance faster and with less total interest paid.
- If you are more than 60 days late in making your payment, you do not have the right to opt out of account changes.
Many have reported already seeing this disclosures and notices from their credit card issuers before the February 22nd deadline. However, you must still be on the lookout for these changes to your statements – whether you receive online delivery or still use snail mail. The bottom line is to know your rights and exercise caution before entering into any agreement.
Have you noticed any of these changes in your statements? Will this change your behavior? Will you still continue to make the minimum payments even after seeing the disastrous results?
Please leave your comments and questions below.
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