Credit Card Law....What's changing and What Isn't

[DI]

SOURCE: November 2009 Issue    Consumerreports.org

The law does:

• Require banks to mail bills 21 days before the due date and give 45 days' notice of change in APR, fees, and other key terms
• Allow you to opt out of rate hikes and fee increases and to close accounts while paying off the balances under the old interest rates
• Restrict interest-rate increase during the first year of card use
• Prohibit banks from charging overlimit fees, unless your sign up to be allowed to exceed your credit limit
• Prohibit rate increases on existing balances unless you're 60 days overdue
• Give you the right to revert to an older, lower interest rate after making on-time payments for six consecutive months
• Restrict cards for people under 21 without an older cosigner or proven income
• Require banks to apply payments to the balances with the highest interest rate first
• Prohibit gift-card fees for one year and expiration dates for at least five years 

The law doesn't:

• Prevent issuers from imposing annual fees on credit accounts
• Set a ceiling on interest rates
• Allow you to opt out of increase in the minimum monthly payment
• Require banks to give you notice if your borrowing limit is lowered or your credit card is canceled
• Require banks to notify your if your interest rate goes up because of an increase in prevailing rates, such the prime rate
• Impose regulations on more prepaid cards or debit cards

Message Edited by DI on 10-14-2009 06:36 PM

[Tons_of_Debt]

Allow you to opt out of rate hikes and fee increases and to close accounts while paying off the balances under the old interest rates

Prohibit rate increases on existing balances unless you're 60 days overdue

These two are confusing me. Why would we need the ability to opt out of rate hikes and close accounts to pay off the current balance if they are unable to raise the rate on existing balances?

[creditwherecreditisdue]

The entire Credit CARD Act of 2009 may be referenced here:

     http://www.govtrack.us/congress/billtext.xpd?bill=h111-627

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@DI wrote:

The law does:

• Restrict cards for people under 21 without an older cosigner or proven income

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‘(ii) submission by the consumer of financial information, including through an application, indicating an independent means of repaying any obligation arising from the proposed extension of credit in connection with the account.

Sounds like stated income would be sufficient.

[Anonymous]

Thanks DI - superb post!

[Anonymous]

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@DI wrote:

The law does:

• Require banks to apply payments to the balances with the highest interest rate first

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Actually requires banks to apply only the amount which is in excess of the minimum payment to the highest interest rate balance, an important distinction that always seems to be missed in the news articles. Whatever the minimum payment amount is (2% or 5% or whatever) still gets applied wherever the bank chooses, which will usually be the lowest APR balance ...

[creditwherecreditisdue]

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@Anonymous wrote:

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@DI wrote:

The law does:

• Require banks to apply payments to the balances with the highest interest rate first

---

Actually requires banks to apply only the amount which is in excess of the minimum payment to the highest interest rate balance, an important distinction that always seems to be missed in the news articles. Whatever the minimum payment amount is (2% or 5% or whatever) still gets applied wherever the bank chooses, which will usually be the lowest APR balance ...

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+1. Agree with the comment, too.

[DI]

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@creditwherecreditisdue wrote:

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@Anonymous wrote:

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@DI wrote:

The law does:

• Require banks to apply payments to the balances with the highest interest rate first

---

Actually requires banks to apply only the amount which is in excess of the minimum payment to the highest interest rate balance, an important distinction that always seems to be missed in the news articles. Whatever the minimum payment amount is (2% or 5% or whatever) still gets applied wherever the bank chooses, which will usually be the lowest APR balance ...

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+1. Agree with the comment, too.

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That particular part of the law is in regards to consumers who completes a BT, and make charges on the account after the BT.  If a customer who has a card with a 0% APR on BT's and a 12.99% on purchases do a BT and make purchases, the law would force the bank to apply the payment to the purchase charges since it has the higher APR.    

Message Edited by DI on 10-14-2009 03:52 PM

[creditwherecreditisdue]

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@DI wrote:

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@creditwherecreditisdue wrote:

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@Anonymous wrote:

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@DI wrote:

The law does:

• Require banks to apply payments to the balances with the highest interest rate first

---

Actually requires banks to apply only the amount which is in excess of the minimum payment to the highest interest rate balance, an important distinction that always seems to be missed in the news articles. Whatever the minimum payment amount is (2% or 5% or whatever) still gets applied wherever the bank chooses, which will usually be the lowest APR balance ...

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+1. Agree with the comment, too.

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That particular part of the law is in regards to consumers who completes a BT, and make charges on the account after the BT.  If a customer who has a card with a 0% APR on BT's and a 12.99% on purchases do a BT and make purchases, the law would force the bank to apply the payment to the purchase charges since it has the higher APR.    

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Incorrect! Revike has it exactly right!

SEC. 104. APPLICATION OF CARD PAYMENTS.

Section 164 of the Truth in Lending Act (15 U.S.C. 1666c) is amended--

(1) by striking the section heading and all that follows through ‘Payments’ and inserting the following:

-‘Sec. 164. Prompt and fair crediting of payments

‘(a) In General- Payments’;

(2) by inserting ‘, by 5:00 p.m. on the date on which such payment is due,’ after ‘in readily identifiable form’;

(3) by striking ‘manner, location, and time’ and inserting ‘manner, and location’; and

(4) by adding at the end the following:

‘(b) Application of Payments-

‘(1) IN GENERAL- Upon receipt of a payment from a cardholder, the card issuer shall apply amounts in excess of the minimum payment amount first to the card balance bearing the highest rate of interest, and then to each successive balance bearing the next highest rate of interest, until the payment is exhausted.

‘(2) CLARIFICATION RELATING TO CERTAIN DEFERRED INTEREST ARRANGEMENTS- A creditor shall allocate the entire amount paid by the consumer in excess of the minimum payment amount to a balance on which interest is deferred during the last 2 billing cycles immediately preceding the expiration of the period during which interest is deferred.

‘(c) Changes by Card Issuer- If a card issuer makes a material change in the mailing address, office, or procedures for handling cardholder payments, and such change causes a material delay in the crediting of a cardholder payment made during the 60-day period following the date on which such change took effect, the card issuer may not impose any late fee or finance charge for a late payment on the credit card account to which such payment was credited.’.

[Anonymous]

SEC. 104. APPLICATION OF CARD PAYMENTS.

Section 164 of the Truth in Lending Act (15 U.S.C. 1666c) is amended--

(1) by striking the section heading and all that follows through ‘Payments’ and inserting the following:

-‘Sec. 164. Prompt and fair crediting of payments

‘(a) In General- Payments’;

(2) by inserting ‘, by 5:00 p.m. on the date on which such payment is due,’ after ‘in readily identifiable form’;

(3) by striking ‘manner, location, and time’ and inserting ‘manner, and location’; and

(4) by adding at the end the following:

‘(b) Application of Payments-

‘(1) IN GENERAL- Upon receipt of a payment from a cardholder, the card issuer shall apply amounts in excess of the minimum payment amount first to the card balance bearing the highest rate of interest, and then to each successive balance bearing the next highest rate of interest, until the payment is exhausted.

‘(2) CLARIFICATION RELATING TO CERTAIN DEFERRED INTEREST ARRANGEMENTS- A creditor shall allocate the entire amount paid by the consumer in excess of the minimum payment amount to a balance on which interest is deferred during the last 2 billing cycles immediately preceding the expiration of the period during which interest is deferred.

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There is no other part of the bill that I can find which references changes in application of payments, and there is nothing that says the "in excess of minimum payment" clause only applies to unique combinations of BT and purchase balances. There is a virtually unlimited number of situations where a customer can have multiple APRs which apply to different sub-balances - a customer can have a promo purchase rate(s), a regular purchase rate, a promo BT rate(s), a regular BT rate, a cash advance rate, etc., all applying to portions of their overall balance. Section 164 (b) (1) certainly seems to apply in general to all payments made toward a multiple-APR balance ...

(Edit) Oops, too slow ...

Message Edited by Revike on 10-14-2009 02:27 PM

[DI]

This whole thing is confusing!!   One more reason to  PIF each month.