How Government Regulates Credit Card Companies
Legislation is working hard to eliminate shady late billing practices especially by those in the credit card industry. In the US recently the House Finance Services Committee recently passed the Credit Card Holder's Bill of Rights which was designed to set new limits on when interest can be raised on credit cards as well as set limits on fees and finance charges.
This law is designed to protect individuals against unfair, deceptive, and anti-competitive pricing. This included addressing common problems like double-cycle billing, retroactive interest rate hikes, and due-date gimmicks. The result is a list of protective measures that could change the face of the credit card industry.
Because this law has only recently has gone into effect, it may take some time for individuals to notice a change in their monthly statements. Those who are scam artists in this line of business often circumvent new laws and, having built their business on consumer desperation, will continue to apply excess charges for as long as possible. One area where they take significant advantage is with late charges as well as over-limit fees.
One change in the law that will help many is called double-cycle billing. This is where cardholders pay in full and on time, but through flocculating cutoffs dates, balances are maintained through fees and interests that are applied after payments have been applied. In this instance, although a $500 debit may be paid in full, interest on the $500 is applied after the payment is made in order to maintain a balance.
One of the ways in which late payments are applied is by sending statements on the due date. By the time they are received and paid, late charges are applied. With this new law, this is no longer allowed. In fact, statements must be mailed no less than 25 days in advance and late charges can be avoided as long as bills are paid by 5 p.m. on the due date.
The new law also prevents customers from being caught up in high subprime rates they can't get out of. This is where the interest rate exceeds 25% of the credit limit and compounds annually. Often those with lower incomes, poor credit histories, and are younger consumers are targeted for these types of programs. Additionally, it establishes definitions for terms like "fixed rates" and "prime rates" so that consumers are no longer mislead or deceived.
One of the common complaints is that set credit card limits are lowered prior to payments being received in order to charge over-credit limit charges. These can exceed the cost of a late payment and goes against an individual on their credit history. Unfortunately, the new law does not specifically deal with this issue so consumers need to be wary when working with credit card companies to ensure they are not being scammed by misleading and deceitful practices.
It's important that individuals perceiving they may have been scammed or encountered illegal practices under the new law, file grievances with the proper authorities immediately. Additionally, learning budgeting skills and only using credit cards for emergencies is a great way to keep credit scores high while having the funds available should they ever be needed. Should fraud occur, however, never hesitate to file a petition with the courts in order to let credit card companies know that illegal practices will no longer be tolerated by consumers.