2009 Credit Card Reform Bill
Current Bill Status: Introduced on January 22, 2009, the bill passed the House on April 30, 2009 with 70 amendments proposed by Senators and Congressman. On May 13th of this year, a cloture (motion to bring the debate to a quick end) was presented to the Senate.
On Tuesday, May 19th, the Bill was passed by the Senate. The next step is for the Bill is to be approved by a conference committee of representatives and senators. They will work out differences in the versions of the bill passed by each chamber. Following their approval, the bill will be sent to the President where he will have the ability to sign the bill into law.
The Bill that passed the Senate was exactly the same as the one that passed the house so the conference committee was unnecessary. On May 20th, the bill was presented to President Obama. He is expected to sign the bill on Friday May 22nd.
On May 22, President Obama signed the bill into law. Banks must now begin their system upgrades as the bill will go into effect on June 30, 2010. After August 21, 2009, banks may no longer increase cardholder APR without providing a written disclosure to the cardholder with details on how the current balance will be charged. They also must give the cardholder 45 days notice before the change goes into effect. That means that you should watch your interest rates closely before that date as banks will likely try to increase some interest rates before those regulations go into effect.
Updated: May 22, 2009
The following are policies that will be disallowed by law if this regulatory bill passes and is signed into law:
1. Universal Default: This means that if you are declared in default by another creditor then all other creditors can increase your interest rate to the default rate regardless of how consistently you pay with them. This Bill disallows this practice and requires credit card companies to only put a cardholder into default if they default with their own company. Therefore, American Express cannot raise your interest rate up to the default rate because you default with Bank of America.
2. Rate Change: Under this new legislation, card issuers are no longer allowed to change the interest rate at any time for any reason. They now have to have cause to increase the interest rate. Card issuers still have the ability to lower interest rates in any circumstances.
3. Two-Cycle Billing: In this practice, if you pay off your $5,000 balance off in full, and the next month charge $3,500 and only pay off $2,500, banks may charge you interest on $6,000 ($5,000 + $1,000) even though you paid your balance in full in the previous month. This bill eliminates that practice.
4. Retroactive Application of Interest Rates: Under this new law, banks can no longer increase your interest rate and apply that increased rate to charges that incurred under the lower interest rate. Many people were not aware of banks doing this, but many banks have practiced this policy for years.
5. Limiting Overlimit Transactions: Many issuers allow cardholders to go a nominal amount over their limit, and the bank then charges an astronomical fee. Under this bill, this practice is not disallowed, but the cardholder has the option to require the issuer to not let the card go over-limit.
6. Multiple Overlimit Fees: The new Bill will stop card issuers from charging multiple overlimit fees for overlimits created in the same billing cycle. For example, if you go overlimit $10, the banks can charge an overlimit fee. Then, if during the same billing cycle, you charge another dollar, the bank cannot charge you another overlimit fee. Banks were allowed to do this in the past.
7. Pro Rata Payment Allocation: If you have different interest rates for different balances on your account, banks now must apply payments based on the percentage of balances that are at each interest rate. Issuers can also apply payments to higher interest rate balances first. This topic is discussed in more detail in our recent press release.
There are some additional topics of change for this bill, but these are the most important to almost all cardholders. If you have any questions about the status of this bill, or about any details of the bill, send us an email at support@brienprivatefinance.com. You can also give us a call at (800) 604-1924.
For more up to date financial advice and personalized finance consulting contact us and we can talk about your options.