A year’s worth of credit card reform concluded Sunday as the last set of new credit card rules was enacted. Late payment fees and other penalties are the target of the most recent rule changes. Thus completes a sweeping credit card reform effort that started last summer with the Charge card Accountability, Responsibility and also Disclosure (CARD) Act of 2009. Late payment charges can’t exceed $25 under one for the newest federal laws.Over the past year as new credit card rules are rolled out, credit card companies are dramatically increasing interest rates. Another rule requires them to justify those increases to federal regulators.
Enforcement with reasonable rates as well as penalties
The final enactment with credit reform provisions on Aug. 22 means that consumers can’t be charged more than $25 for a late payment, they are no longer charged for putting their cards in a drawer and they could see the rate of interest hikes with the last year rolled back. Reporting on the final round of credit reform, CNN said that rate of interest jumps must be rolled back if the card-issuer fails to adequately explain the reasons for them. Federal regulators will review those reasons and enforce compliance with the law. However, the $25 penalty limit could be lifted in a way that credit card corporations will no doubt abuse as much as they can get away with. If a customer’s late repayments are deemed habitual, the penalty can be hiked as high as could be accre! dited to the cost to the card-issuer for dealing with past due payments. Another new rule prohibits penalty fees from exceeding the minimum payment or the amount charged over the credit limit.
Credit card corporations hooked on fee charges
Credit card corporations look at the new charge card rules as a threat to their bottom line. The latest round of provisions is projected to keep them from being able to penalize their customers to the tune for $3 billion. A Wall Street Journal report on the credit card industry’s response to the rules said that companies are busy upping the ante for balance transfers, cash advances, overseas charges as well as annual fees. Because of the new rules, credit card businesses are also expected to raise monthly minimum repayments due, which would enable them to increase the overdue penalty fee. Banks addicted to large cash for nothing via penalty charges will scramble to keep the money flowing . A credit industry executive told the Journal that before the new credit card rules, credit card corporations collected about $11.4 billion in overdue fees. That figure is expected to drop 29 percent to about $8.1 billion.
Credit card corporations know their customers
While the new credit card rules are giving consumers some protection from excessive late fees, credit card companies have been jacking up interest rates. Another CNN report said that within the second quarter, card companies raised rates of interest on existing card holders to an average of 14.7 percent — up from 13.1 percent a year ago . The current spread between the average credit card interest rate as well as the prime rate is 11.45 percentage points — the widest it has been in 22 years, as outlined by Synovate market research arm of Aegis Group. Synovate also said that credit card spending reached the second-highest level ever in the second quarter.
Further reading
CNN
money.cnn.com
Wall Street Journal
wsj.com
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