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Earlier this May, President Obama signed into law the Credit Card Responsibility Accountability and Disclosure Act. The new law had sweeping changes for the credit card industry after years of shady practices resulted in millions of consumers being negatively affected financially. The law is set take effect in February although the Senate has a amendment that would make it apply immediately. For a list of all the major changes read CCRAD Summary and feel free to distribute it and republish it with proper attribution. The following ten changes are likely to have the biggest impact on you:
Interest Rates:
The biggest changes come with restrictions on the ability of credit card companies to impose interest rate hikes:
1) Credit Card companies need to give 45 days notice instead of 15 days
2) Existing balances will not be subject to the new rate
3) Cardholders can opt to cancel and continue with the same interest rate and minimum payment
4) Increases cannot be based on information from other creditors from a credit report
5) If consumer pays on time for 6 months after rate increase, rate must be returned to old rate
These changes are monumental for the credit card industry. A huge portion of their profits were derived from charging $39 late and over the limit fees on people who habitually forgot to pay on time. And with default rates of 29.99%, they raked in the profits once someone tripped up. The new laws make it much tougher which is why credit card companies have rushed out to raise rates on tens of millions of credit card accounts before the law goes into effect.
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