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Legislation in Congress is on a fast track to being reconciled and then sent on to the President’s desk for his signature. article-credit-card-industry-complaintsHe has said that he wants to have it by Memorial Day, and what a day it would be in terms of the effects of the new guidelines if they become law. Here is how the new legislation is shaping up to affect you as a card holder:

Caps on interest rates. There is a move to place a cap on interest rates that credit card companies can charge their members. Currently as an amendment there is a 15% limit, but whether it will survive and be included in the eventual final bill is uncertain. The struggle is between those who believe that credit card companies have to have some way to make money in response to the credit markets as they rise and fall, and those who advocate strict limits on what banks can charge in interest. They say that the unlimited rate increases are one of the practices that are hurting consumers the most on their accounts.

Limits on raising rates. In addition to this, card issuers would be prohibited from increasing rates on existing balances unless the card holder is over 60 days late on their payments. And, a 45 day notice would be required before interest rate increases could take effect.

Payments applied. Credit card issuers would have to apply payments that are sent in to the balances with the highest interest rates first, instead of last. This means that those balances would go down sooner and the consumer would pay less in interest charges.

Additional restrictions. Another amendment that is being considered would make it easier for retailers to offer discounts to buyers who choose to pay for purchases with cash, checks, or debit cards. This would not only give incentives to consumers, but would prevent credit card companies from continuing to collect their fees that they charge merchants in the processing of credit card transactions.

Banned would be the practice of increasing rates on a card holder’s balances based on late payments to a different card and account. This is known as the ‘universal default’ practice.

Credit card companies would have to restore a lower, original interest rate if the card holder stayed current six months after a late payment.

The overall story. While the final bill has yet to emerge and the question remains if it will have teeth for consumers or become so watered down as to be rendered ineffectual. Meanwhile, consumers have clearly had enough and are defaulting in record numbers as well as using their cards less, and trying to build up small savings to help defray the costs of living.

Experts have warned that it was bound to happen, that circumstances and practices would eventually bring about a crisis in the credit card market. The best advice appears to be to keep making your payments and attempting to decrease your balances. Unless you can obtain a good balance transfer card in order to defray the interest rate charges while you get a handle on your other cards and accounts. The new rules and regulations would not go into effect immediately so you will still need to remain responsible with your credit cards.



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