How The New Credit Card Laws 2010 Can Help - And Hurt

New Credit Card Laws 2009

There are New Credit Card Laws (2009) designed to help free consumers from spiraling credit card debt. The House Bill H.R. 627 was signed into law by President Barack Obama on May 22, 2009. The new law will take effect on February 22, 2010. I will show you how the new laws are supposed to bring some help to consumers saddled with credit card debt. Sometimes new restrictions also bring unintended consequences, and the new credit card debt laws have a few. The positive provisions in the new legislation are here on this Hub. I have another Hub called The New Credit Card Debt Laws that explores some of the negative consequences and missed opportunities. Read on for the good stuff.


New credit card laws 2009 - should you cut up your cards?
New credit card laws 2009 - should you cut up your cards?

The New Credit Card Laws of 2009 Eliminate Retroactive Rate Increases

The credit card companies won't be allowed to raise rates on your existing balances. The exceptions to this rule are in the event that a promotional rate has expires, the variable indexed rate increases or if you are late on your payments by 60 or more days.

If you have multiple credit cards and have ever been behind on one of them, perhaps you have had one of your other card issuers raise your rate on their card even though all payments to them were on time. This practice is what is known as universal default and it will no longer be allowed under the new credit card debt laws.  In the event that you are more than 60 days late on your card and trigger an increase to the “default” rate the bank will be required to restore your lower rate after you've demonstrated six consecutive months of on-time payments.

Promotional, or “teaser” rates are required to be in effect for at least six months. In general, your rate cannot be raised within the first year you have the card except in the event your promotional rate expires, you have a 60-day delinquency or you complete or terminate a workout plan to pay the debt.

The new credit card debt law also requires that you get at least 45 days notice prior to a major change in your contract. This will include rate increases. This changes the current Truth in Lending Act, which previously only required cardholders to receive a 15-day warning of upcoming changes.

No More Handing Out Credit Cards On College Campuses

Under the new credit card debt law if you are a consumer under the age of 21 without proof of a job or you otherwise are unable to show regular, sustainable income, you will not be able to get a credit card unless someone 21 or older can co-sign for you. This is designed to protect young people who often do not have the knowledge or means to properly use credit cards. They often end up saddled with large amounts of debt early in their lives.

A recent Sallie Mae study found that the average college student had a $3,173 balance on their credit cards last year. That figure represents a record high since their first analysis was conducted in 1998. The study also found that more than three-quarters of college students also carry a balance on their cards month to month. I can speak from experience on this one that a credit card at a young age in not a good idea, but it has been a windfall for the credit card companies. I believe this to be one of the most positive provisions in the new credit card debt laws.


The New Credit Card Debt Law Will Restrict Fees

As a cardholder you will not have to face over the limit fees unless you have elected to allow the issuer to approve over-limit transactions through your account. Either way you cannot be charged more than one over-limit fee per billing cycle.

Many credit card companies charge their customers fees to pay their credit card bill over the phone or for payments made via their website. This will not be allowed when the new credit card debt law goes into effect. They are still allowed, though, to charge a fee for expediting your payment in the event you wait until the last minute.

If your payment is received by the due date, or even by the next business day for banks that don't take mailed payments on the due date, you cannot be charged a late fee. If your issuer has a local bricks and mortar branch any payment made there must be credited on the same day.

There have been sub-prime cards out there nicknamed “fee harvesters”. During the first year a consumer has been issued one of these cards the non-penalty fees are not allowed to be more than twenty-five percent of the credit limit.


More Good in The New Credit Card Debt Law

A practice of the credit card issuers where finance charges are based on both your current and previous balances is know as double-cycle billing. This method allowed the credit card company to charge you interest on the amount you owed from the previous month even if it had already been paid off. The new credit card laws will discontinue this reckless activity.

Have you ever transferred a balance to a new card in response to one of those teaser rates? You might have gotten something like 5.99% for one year, but if you charged anything else to the card their regular rate applied to those purchases. If you read the fine print of your agreement, it probably had language in there that payments would be applied to your lower rate balances first. This meant that if you had $5,000 at the lower rate and charged a $100 dinner you would be paying interest on that meal at the higher rate, possibly 18% or more, for the life of your loan. That $100 would continue accruing interest charges and would more than double within five years. Under the new credit card laws if you pay more than the minimum payment it will be applied to your higher interest rates first.

Your statement is now required to be sent 21 days before the payment is due which is an increase from the previous 14 day requirement. There is also a protection in the new credit card debt law for gift cards. It will be required that a gift card will not expire before 5 years, and the issuer can only assess those inactivity fees that hack away at the balance after 12 months have passed.


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Comments 10 comments

MikeNV profile image

MikeNV 7 years ago from Henderson, NV

More and more articles are hitting online about ways the banks are creating new fees and destructing existing accounts to make more money. Instead of complying with the law and making things better they are merely looking for ways to circumvent it. Banks need even more regulation and penalties for gouging consumers. With the recent bailout there are fewer and fewer banks... more consolidation, less competition. And we all must have some kind of bank account. It's a crazy system where we are penalized for doing something we must do.


melissa 7 years ago

I appreciate you making the new laws easy to understand and really like the depth at which you went into each itemization on whats being changed.


suziecat7 profile image

suziecat7 7 years ago from Asheville, NC

Thanks for this Hub. It clarified a lot for me.


Jeffrey Neal profile image

Jeffrey Neal 7 years ago from Tennessee Author

@Mike, I agree to a point. The bailouts were dumb, and will cause more pain in the long run. Competition is the key, but many regulations are what makes competition less likely. Either way, you are right, it is the consumer getting screwed with little to no recourse. Thanks for stopping by!

@melissa, thank you for the comments

@suziecat, appreciate you stopping by!


TnFlash profile image

TnFlash 7 years ago from Tampa, Florida

This is good information for all consumers. I also think the bailout is dumb. Why is the government giving money to rich people when we have people losing their homes, out of work, and have no money. Another problem the government is no longer tracking, is suicide rates. Suicide rates are at record highs in the military.


Michael 6 years ago

I just got a notice from one of my credit card companies stating my interest rate of 9.9% will go up to 16.9% + prime rate index. That's about 23% interest I will be paying. If I request a credit line increase I will pay a fee of 50% of the increase. So if I get $100 I pay $50 fee. How is these new laws benefiting the consumer. Almost TRIPLE Interest rates. Great Law! Not in our favor at all.


JimS 6 years ago

I think the new debt Laws are great. However, as with the Bail out, the administration DID NOT GO far enough. We bailed out the failing Banks , They raised their rates etc and quickly repaid us their actions deepened the recession and slowing any recovery "What's wrong with this picture". in summation, we repaid our ourselves our loan. Anyway, thank you for the Debt Law information


Andy A 6 years ago

new card from HSBC. Made first payment of $200 online , $25 was due. Next day checked online and payment was posted and available credit reflected payment made. 2 days later $199 was posted to my acct as pending lowering my available credit by $199. Called and was told a hold was put on my payment for 14 days, no reason given. My bank paid the $200 already.


medor profile image

medor 5 years ago from Michigan, USA

Nice job is clarifying a very complex area..


Denise de la Sierra 5 years ago

Can credit card companies get away with the sudden, no-notification credit limit cuts? Can you offer more information about this particular issue? Thx.

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