What you need to know about the new Credit Card Reform Laws

Prompted by mass complaints of extortionate charges and usurious practices the credit card companies were reluctantly subjected to new credit card reform laws in February of 2010. Changes were enacted to protect the consumers that fell prey to underhand ways, yet the inevitable result will be higher charges for credit card users in general. When an industry has to be regulated to change its ways, whilst protesting and dragging its feet, it can hardly be expected it will lie down meekly and accept a loss of profits. Protesting consumers were naïve to suppose they could get the changes they wanted without getting something they didn’t want in return.

Without doubt there were some usurious practices around before the reforms, but they did not affect the majority, and the details were in the small print of the documentation signed. In most cases the dodgy dealings which were nothing short of sharp practice were agreed to when the customer supposedly read, before signing, the terms and conditions of the agreement. If they chose not to acquaint themselves with the terms in desperation to obtain credit they can hardly claim foul practice when these terms were implemented.

The worst case scenarios were sub prime credit cards aimed at those unable to obtain credit elsewhere due to their bad credit history. Whilst most would have declined to become involved with card issuers who by rights should have been labelled loan sharks, many people actually ran to deal with them. The result was they paid an application fee to obtain a credit card which had an annual fee, a processing fee, a fee to use the card, and whatever other fees they agreed to pay by signing the agreement which was legal.

By the time all the fees had been taken off the agreed credit limit there was no credit left to use on the card, so they had to pay another fee to increase the credit limit. This practice is now no longer possible as these sub prime lenders are now legally bound to charge no more in fees than 25% of the available credit limit. Of course they can add other charges on later for late payments but they can’t charge up front as they did. Thus the credit card reforms now protects the extremely naïve from being conned by such sharp practices.

The reforms also made changes to more standard ways in which customers in general were being fleeced. Information pertaining to charges must now be clearly displayed on statements, and the old bug bear regarding due dates has been fixed. The credit card companies can no longer charge the consumer for paying on the correct date but two hours before the close of business. Now any payment made by 5pm on the due date is on time and the consumer clearly knows where they stand.

Other changes include the card companies no longer being able to charge the customer for going over their credit limit unless the customer agrees to the charge first, and they can no longer raise the interest rates on balances unless the account is two months in default.

The new changes which are filtering through in reaction to these credit card reforms are the introduction of annual credit card fees which is set to become commonplace; inactivity fees for not using the credit card enough; and the raising of interest rates and balance transfer rates. With loyal customers who pay on time being the new targets to raise extra funds from it is time for credit card users to rethink the way they rely upon their plastic, and certainly to start to reduce the number of cards they hold, as each card could suddenly have an annual fee imposed.

People need credit cards to maintain a good credit score, but need to ask at what price. Without doubt they will start to pay the price of the credit card reforms which they asked for.