topic Re: Credit Card Reform Question? in Credit Cards

Credit Card Reform Question?

GomerPyle — Sun, 11 Oct 2009 20:31:09 GMT

Will the credit card reform act cover balances retroactively or only balances created after the February start date? Specifically, will a higher interest bearing balance that already exists have payments applied to it first or will this only apply to new balances created after February?

Re: Credit Card Reform Question?

Anonymous — Sun, 11 Oct 2009 23:06:26 GMT

it should apply to the existing balance as well

Re: Credit Card Reform Question?

Anonymous — Mon, 12 Oct 2009 02:47:02 GMT

@GomerPyle wrote:
Will the credit card reform act cover balances retroactively or only balances created after the February start date? Specifically, will a higher interest bearing balance that already exists have payments applied to it first or will this only apply to new balances created after February?

It applies to existing balances. However, only the part of the payment above the minimum payment amount has to be applied to the highest APR.

For example, say you have an account with part of the balance at 6% and part of the balance at 15%. The minimum payment is $100. If you send in a payment of $150, only $50 of that is required to be applied to the 15% APR balance. The first $100 is still applied to the 6% APR balance ...

Message Edited by Revike on 10-11-2009 07:47 PM

Re: Credit Card Reform Question?

Anonymous — Mon, 12 Oct 2009 04:36:54 GMT

Here ya go:

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.’.

Re: Credit Card Reform Question?

Anonymous — Mon, 12 Oct 2009 04:44:21 GMT

Revike has it exactly right. Section 164(b)(2) is there to keep you from being screwed at the end of a 0% APR/deferred interest deal. You still may have a problem if you mix balances on those accounts. Proceed with caution!

Re: Credit Card Reform Question?

Anonymous — Wed, 28 Oct 2009 20:16:03 GMT

I just called citibank to clarify this - they've been literally hounding me, sending me e-mails and checks to use, etc., to transfer a balance onto their card.

There are two options: 0% for 6 months (which I am not taking because the new laws allow them to raise the rates at the end of special offer periods) and 1.99% for 16 months.

The current interest rate on the card is 0% (prior offer) but will go up to 9.9% (or whatever??) starting March 1, 2010.

So basically I will have one balance at 1.99% and one at 9.9% (or whatever . . .). According to existing terms they will apply all payments to the lower interest rate, so the 9.9% balance will just accrue interest until the other balance is paid off.

Anyway, first I get the India call center, and they have no idea of the new law. I ask for a supervisor and she says she knows about the law, but they have not "determined" whether it will apply to existing credit card balances. My guess is that their attorneys and lobbyists are busy looking at ways around any ambiguities in the new law - which does NOT state it applies to existing accounts that have balances with different APRs.

I have to decide by 12/20/09 whether to accept their offer. The balance I want to transfer is currently at 16.9% but WellsFargo decided to hike it up to 19.9% (!!!!!).

I'm not sure what to do here. Anything's better than 20% but I really don't want the existing balance to accrue 9.9% (or whatever they increase it to) while I work at paying off the new balance . . .

Are we SURE it applies to existing accounts?

Re: Credit Card Reform Question?

Anonymous — Wed, 28 Oct 2009 20:23:40 GMT

Welcome to the forums!

The amount of any payment rendered that exceeds the minimum payment due must be applied to the balance carrying the highest APR first. There is no ambiguity about this matter and the CC companies are probably the last people to ask.

Re: Credit Card Reform Question?

Anonymous — Wed, 28 Oct 2009 20:39:40 GMT

You're right. They were trying to imply that the new law requiring payments to apply to the higher APR balance would NOT apply to existing accounts. (The ambiguity being whether it applies to existing accounts/balances or only accounts we open after the law takes effect).

I think they know it WILL apply, but they're busy working on some sort of workaround so they aren't ready to concede. Most likely they're plying some congressperp or have their attorneys on overtime figuring out a way to keep screwing with us.

Re: Credit Card Reform Question?

Anonymous — Wed, 28 Oct 2009 20:43:54 GMT

The applicable section of the law is:

(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.

There is no further restriction indicating that this rule applies any differently to existing balances than it does to future balances. Therefore, it appears that if you make a payment prior to February 22, that payment will be applied however the credit card company wants - meaning it will almost certainly be applied to the lowest APR balance first. If you make a payment on February 22 or later, and you pay more than the minimum, the amount in excess of the minimum will be applied to the highest APR balance.

Keep in mind that, until/unless the law is clarified further, the minimum payment percentage is still subject to change by your credit card company. So, if your minimum as of February 22 is 2% and you were planning to pay 5% each month, with the expectation that the extra 3% would go to the highest APR balance, and then the CCC raises your minimum to 5%, you will then see your entire payment applied to the low APR balance.

If Congress succeeds in moving up the implementation date (which I think is doubtful), replace February 22 with December 1 ...

Message Edited by Revike on 10-28-2009 01:43 PM

Re: Credit Card Reform Question?

Anonymous — Wed, 28 Oct 2009 20:45:08 GMT

The law is unambiguous so there's not a whole lot they'll be able to do - except raise the minimum payment...

Re: Credit Card Reform Question?

Anonymous — Wed, 28 Oct 2009 20:45:25 GMT

for AA they still raise the rate for new purchases for being late, but if you become 60 days past due ,they can apply to new rate to the entire balance

Re: Credit Card Reform Question?

Anonymous — Wed, 28 Oct 2009 20:50:42 GMT

Discover has already raised their minimum payments...

Re: Credit Card Reform Question?

Anonymous — Wed, 28 Oct 2009 21:34:56 GMT

Is there a maximum monthly minimum payment percentage?

Re: Credit Card Reform Question?

Anonymous — Wed, 28 Oct 2009 22:30:52 GMT

I don't know but I think a great many people are going to be severly disappointed in this. The reality is, that anytime we see more regulation, ESPECIALLY GOVERNMENTAL there will be loop holes in it .

I think in the long run this will do far more to eliminate the "free flowing credit" that many posters here feel is their right. I also think it will eliminate credit offers to many more people who might actually neeed them.

The Government has as always had a knee jerk reaction to things and have reacted quickly to satisfy a very few voices without really looking at what it will do. They have said in essence, we will keep you from raising interest rates. We will in essence keep you from throwing out offers of money which has brought us to the point we are now. Sadly,while there is a certain amount of truth in both statements, it fails to address the real problem.

I have talked with many people in the financial industry, including Bankers, Accountants, Attorneys etc and they are all of the opinion this will actually HELP ADD COVER to Banks. They say , you cant raise rates, then banks say, well we have to protect ourselves so we will lend only to "better customers". They say, you cant continue to throw loans out, and so Abnks don't make them as readily to consumers. They say you neeed fewer risky loans so BAnks will make more asset secured loans, such as to businesses etc, while making it harder on the Individual to get Credit.

Read the bill VERY CAREFULLY and you will not see where they can be mandated to LOAN MONEY (as was FORCED on Banks years ago, in regards to making money more accessible to people) and this will cover the banks, thus allowing them to say, "we are just doing what you asked". Better quality loans, better rates, more secured, less risk.

You will see some severe changes in availability of Credit to consumers in the UNSECURED AREA. Now granted, I think that is actually a very good thing and frankly all the people I speak to in the financial world do tell me the consensus opinion is that the Credit Card Bubble is the next to burst.

I just urge people to be in a position where when it does, they are not dependant upon constant CLI"s, Balance Transfers, etc to define their Creditworthiness, but it is defined by their use and payment patterns.

I sincerely hope everyone reaches their Credit. Goals.

Re: Credit Card Reform Question?

Anonymous — Wed, 28 Oct 2009 23:42:05 GMT

It is almost universally agreed that the commercial real estate bubble will be the next to burst. It's actually already happening.

As for consumers, DickC, the bank are in the business of providing credit. (They rent money.) If they don't provide credit they don't do business. If they don't do business they don't make any money. They will find a way to carry on. Tomorrow will look a lot more like today than it won't. The sky is not falling. (At least in that sense.)

Re: Credit Card Reform Question?

Anonymous — Thu, 29 Oct 2009 00:37:09 GMT

@Anonymous wrote:
It is almost universally agreed that the commercial real estate bubble will be the next to burst. It's actually already happening.

As for consumers, DickC, the bank are in the business of providing credit. (They rent money.) If they don't provide credit they don't do business. If they don't do business they don't make any money. They will find a way to carry on. Tomorrow will look a lot more like today than it won't. The sky is not falling. (At least in that sense.)

You are correct about the Commerical Real Estate Bubble and yes, it is universally recognized it is actually happening. That is why they say they say the Credit Card Bubble is next. Commericial Real Estate is already here and prudent people are looking forward. They are preparing for it.

Absolutely Banks will find ways to lend money. They always have. The truth is though what many hail as cover for the consumer will indeed be cover for the Banks.

I have no illusions at all the sky is falling , as a matter of fact, I think the sky is actually going to get brighter for people who act responsibly. Yes, some will always think it is falling, but then again regardless of what circumstance they are in, it will be someone elses fault for happening and someone elses mess to clean up.

As for me, I see things getting better. Some won't. Luckily time will prove which scenario is correct.

Re: Credit Card Reform Question?

Anonymous — Thu, 29 Oct 2009 00:48:20 GMT

I've said for over a year now that when the dust settles those at the lower end of the credit spectrum are going to be left standing on the street looking in when it comes to unsecured credit. The time to get your credit house in order is actually already past. I'm afraid there won't be any new subprime issuers coming along to save the day either. That business model's been tried and there's no way to finance the paper now. No way to collect large initial fees from new cardholders either unless they're willing to pay them up front. Not to be elitist about the matter, but what end of the spectrum are all the CC problems coming from anyway? None of this was caused by the Credit CARD Act of 2009. The bad extentions of credit came well before and "The Act" is not resposible for the tanked economy. (That's a subject we don't discuss here.)

Re: Credit Card Reform Question?

Anonymous — Thu, 29 Oct 2009 03:20:55 GMT

I agree completely, those who probably need some form of credit extended to them the most, will be those hurt the greatest. A shame it has to be this way but that is whats going to happen.

Many changes coming in the unsecured market and like you say, those who have their house in order will ride it out and be fine. Those who do not, will have problems.

Glad to know you have your credit house in order.

Re: Credit Card Reform Question?

Anonymous — Thu, 29 Oct 2009 03:40:56 GMT

We'd all be better off if those who had credit need but were not credit worthy had been sidelined during the easy credit binge. Now we all gotta have a hangover.

Meanwhile, the bank are still gonna extend that credit to somebody. It's just going to be a different distribution of somebodies...

Re: Credit Card Reform Question?

Anonymous — Thu, 29 Oct 2009 03:55:46 GMT

Yes, they definately will be extending it to someone. I actually consider myself fortunate that we are at the position I can easily say "No Thank You" to the offers.