Credit Card Reform

The credit card reform bill is being voted on by the House of Representatives today. The Bill which was written to help protect credit hard holders from unscrupulous credit card practices will probably be passed by both the Houses and signed by President Obama.

Here are some of the new changes.

The credit card bill will  prohibit a creditor from increasing any annual percentage rate of interest (APR) applicable to the existing balance on an open end consumer credit card account unless specified conditions are met.

Allows a creditor to increase an APR on the existing credit card balance only if the increase is due solely to:

• A change in the index rate, most credit cards are tied to the prime rate 
• A promotional credit card interest rate expires
• A payment was not received during the 30-day grace period after the due date
• Failure to comply with a workout plan.

Prohibits any such APR increase from exceeding the APR applicable to the particular category of transactions on the day before the effective date of the workout plan.

Requires a 45-day advance notice of credit card account rate increases, except one resulting from a change in index

States that, with certain exceptions, written notice of an increase in any annual percentage rate of interest shall be effective at the end of the one-year period beginning when the account is opened.

Prohibits any significant contract change from taking effect unless the creditor provides a written notice fully describing the change at least 45 days before the change takes effect.

Prohibits the imposition of a fee on an outstanding credit card balance, at the end of a billing period, that is attributable only to interest accrued during the preceding billing period on an outstanding balance fully repaid during that preceding billing period.

Requires each periodic statement of account to provide the toll-free telephone number, Internet address, and website at which the payoff balance may be requested, including statements of account issued by a small issuer (of fewer than 50,000 credit cards).

Grants a consumer the right to reject a new credit card before the creditor notifies a consumer reporting agency of its corresponding account.

Sets forth special rules for accounts with promotional rate balances or deferred interest balances.

Prescribes payment allocations to be used if two or more different APRs apply to different portions of an outstanding balance on a credit card account.

Prohibits a creditor from denying a cardholder a specified payment grace period if the cardholder takes advantage of a promotional rate balance or deferred interest rate balance.

Requires creditors to send a periodic credit card statement of account to the consumer at least 21 calendar days before the due date for the next payment on the outstanding balance.

Prohibits a creditor from treating as a late payment the receipt of a periodic payment by mail as of the creditor’s next business day if the date established by the creditor as the payment due date is a day on which mail is either not delivered or is not accepted by the creditor for processing.