House Resolution 627, also known as the Credit Card Accountability Responsibility and Disclosure Act of 2009, or CARD, provides debt help to consumers by preventing creditors from following many common predatory lending practices. Under these restrictions, vulnerable populations, such as individuals under the age of 21, may no longer get easy credit. Individuals and families currently using credit cards are given additional grace periods for payment, and many excess fees are no longer allowed.
Solutions for Revolving Debt
Credit card debt solutions begin with fair practices on the part of the creditor. Consumers working to pay down existing debt can often get caught in a trap of increasing fees, which can snowball quickly. In the past, credit card companies had the option to increase interest rates at any time, for any reason.
Increased interest rates resulted in higher balances, and higher payments. The increased payments can then result in missed payments, which allow the charge of additional fees, and perhaps even another increase in interest rates. These fees often pushed the credit balance over the card's limit, which resulted in even more fees and a feeling of hopelessness on the part of the consumer.
Eliminated Over Limit Fees
Over limit fees are a thing of the past, thanks to this new legislation. H.R. 627 prevents credit card companies from charging over-the-limit fees, except under specific circumstances. A consumer must request that the credit card honor charges that carry the card over the card's limit, and agree in advance to pay the fee if they make a charge that results in a balance that is over the limit. Otherwise, a consumer's card will simply be declined, if they attempt to make a purchase that would carry the balance over the predetermined limit.
Interest Rate Increases
In order for credit companies to increase interest rates due to missed payments, they must follow some new rules.
- Creditors must now clearly and conspicuously post on all statements the date by which a minimum payment must be made, and notice that an increased interest rate may apply if minimum payments are not made for 60 days.
- If interest rates are increased due to late payments, the creditor is only allowed to maintain those increased rates for 6 months. After that period, if the consumer has made timely payments during the interim, the previous interest rate must be reinstated.
When making a payment on the day it is due, consumers used to be forced to choose between paying a late fee, or paying an exorbitant fee to make a telephone payment. This practice has now been eliminated by this new legislation, which prevents creditors from charging any fee for payments, regardless of the method.
Credit Help from the Government
H.R. 627 has provided many benefits to U.S. consumers. If you're trying to pay down your revolving debt, or get out of credit card debt altogether, the reduction or elimination of predatory fee arrangements will be of tremendous benefit to your efforts.
Sources:
Govtrack. Credit Card Accountability Responsibility and Disclosure Act of 2009. Accessed March, 2011.
Updated: March, 2011
Victoria Nicks - Victoria Nicks has a Master's Degree in IT, and extensive hands-on experience with various types of hardware and software.
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