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bobovich
Posts: 3
Registered: ‎01-26-2010
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Question on Interest rate and Credit Card Law

Hello everybody,

 

I have a question. My current credit card is a variable interest rate. However, when I was reading over the new credit card rules, I read that cc companies are not allowed to raise interest rates on prior balance, only on new balances. How would that work with variable interest though? I also read there are some exceptions to this specific rule. Can somebody explain to me exactly what would happen to my interest rate if Prime will go up? Please note that this credit card is not a transfer balances that is expiring, it is a regular account that was converted from fixed to variable during credit crisis meltdown

 

Thanks


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MarineVietVet
Posts: 14,136
Registered: ‎07-14-2009
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Re: Question on Interest rate and Credit Card Law

[ Edited ]

 


bobovich wrote:

Hello everybody,

 

I have a question. My current credit card is a variable interest rate. However, when I was reading over the new credit card rules, I read that cc companies are not allowed to raise interest rates on prior balance, only on new balances. How would that work with variable interest though? I also read there are some exceptions to this specific rule. Can somebody explain to me exactly what would happen to my interest rate if Prime will go up? Please note that this credit card is not a transfer balances that is expiring, it is a regular account that was converted from fixed to variable during credit crisis meltdown

 

Thanks


 

Here is a section of the Credit Card Act about interest rates:

 

SEC. 171. LIMITS ON INTEREST RATE, FEE, AND FINANCE CHARGE INCREASES APPLICABLE TO OUTSTANDING BALANCES. 

 

(a) IN GENERAL.—In the case of any credit card account under an open end consumer credit plan, no creditor may increase any annual percentage rate, fee, or finance charge applicable to any outstanding balance, except as permitted under subsection (b).

 

(b) EXCEPTIONS.—The prohibition under subsection (a) shall not apply to—

 

(1) an increase in an annual percentage rate upon the expiration of a specified period of time, provided that—

 

(A) prior to commencement of that period, the creditor disclosed to the consumer, in a clear and conspicuous manner, the length of the period and the annual percentage rate that would apply after expiration of the period;

 

(B) the increased annual percentage rate does not exceed the rate disclosed pursuant to subparagraph (A); and

 

(C) the increased annual percentage rate is not applied to transactions that occurred prior to commencement of the period;

 

(2) an increase in a variable annual percentage rate in accordance with a credit card agreement that provides for changes in the rate according to operation of an index that is not under the control of the creditor and is available to the general public;

 

 

It looks like the section I highlighted in red covers you and me and many others who were switched to a variable rate.   :smileysad:

 

But I could be wrong about this. It's tough to read CongressSpeak.  :smileyhappy:

 

 

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Senior Contributor
Wolf3
Posts: 3,198
Registered: ‎01-24-2010
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Re: Question on Interest rate and Credit Card Law

 


marinevietvet wrote:

 


bobovich wrote:

Hello everybody,

 

I have a question. My current credit card is a variable interest rate. However, when I was reading over the new credit card rules, I read that cc companies are not allowed to raise interest rates on prior balance, only on new balances. How would that work with variable interest though? I also read there are some exceptions to this specific rule. Can somebody explain to me exactly what would happen to my interest rate if Prime will go up? Please note that this credit card is not a transfer balances that is expiring, it is a regular account that was converted from fixed to variable during credit crisis meltdown

 

Thanks


 

Here is a section of the Credit Card Act about interest rates:

 

SEC. 171. LIMITS ON INTEREST RATE, FEE, AND FINANCE CHARGE INCREASES APPLICABLE TO OUTSTANDING BALANCES. 

 

(a) IN GENERAL.—In the case of any credit card account under an open end consumer credit plan, no creditor may increase any annual percentage rate, fee, or finance charge applicable to any outstanding balance, except as permitted under subsection (b).

 

(b) EXCEPTIONS.—The prohibition under subsection (a) shall not apply to—

 

(1) an increase in an annual percentage rate upon the expiration of a specified period of time, provided that—

 

(A) prior to commencement of that period, the creditor disclosed to the consumer, in a clear and conspicuous manner, the length of the period and the annual percentage rate that would apply after expiration of the period;

 

(B) the increased annual percentage rate does not exceed the rate disclosed pursuant to subparagraph (A); and

 

(C) the increased annual percentage rate is not applied to transactions that occurred prior to commencement of the period;

 

(2) an increase in a variable annual percentage rate in accordance with a credit card agreement that provides for changes in the rate according to operation of an index that is not under the control of the creditor and is available to the general public;

 

 

It looks like the section I highlighted in red covers you and me and many others who were switched to a variable rate.   :smileysad:

 

But I could be wrong about this. It's tough to read CongressSpeak.  :smileyhappy:

 

 

From a BK years ago to:
9/09 EX pulled by lender 802
3/10 EQ- 800
4/10 TU -772

You can do the same thing with hard work

Credit Scoring 101
Common Abbreviations
Frequently Requested Threads
Whats In Your FICO Score


 

I believe this is correct.  

 

My interpretation that your variable APR will go up and down exactly the amount that the prime goes up and down, and it will apply to your whole balance.  

 

However, I don't believe they are allowed to change the delta rate and apply it existing balances.   If your rate is Prime + 10%, they can't raise the 10% part any apply it to the existing balance.

 

 

New Member
bobovich
Posts: 3
Registered: ‎01-26-2010
0

Re: Question on Interest rate and Credit Card Law

Thanks. It looks like all I need to worry about is the Fed's Prime rate movement (which is usually about 0.25% each time), not the actually made up cost of credit % set by the credit companies. 


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