10 Things to Know About New Credit-Card Rules - For What It's Worth - Comcast.net Finance

At long last, the U.S. Senate earlier today passed a bill aimed at righting the so-called injustices perpetrated by credit-card companies. The House is expected to endorse the measure later this week, and President Obama could see the bill on his desk before Memorial Day.

In the wake of the subprime mortgage crisis, sneaky rate increases, unexpected account closures and other punitive credit-card practices have been the subject of much media coverage of late. In this space alone, I have devoted no fewer than five columns and nearly 3,000 words to this topic in the past six months.

So what exactly emerged from all of this heated debate? Is what Congress has produced enough to provide real relief for struggling American consumers? That remains to be seen. But for now, here are 10 things you should know about the bill -- and what the legislation might mean for you:

1. Change won't occur overnight. The bill gives credit-card companies nine months to change their ways. Though this may not be the kind of quick fix many Americans need as they struggle to make ends meet, the timeline is a tad shorter than the one seen for a similar set of new Federal Reserve regulations, which won't take effect until July 2010.

2. Consider yourself warned. When the new rules are in place, credit-card companies will need to notify you 45 days in advance before increasing your interest rate. The good news: You'll see these increases coming and be able to plan accordingly. The bad news: You'll no longer be able to tell your spouse your card's rate suspiciously and mysteriously jumped without fair warning.

3. Paying your bill becomes free and easy. The legislation mandates that card companies accept Internet and telephone payments -- and that they would need to offer these services for free. This represents a significant change to the current state of affairs, where some card companies use online and phone payments to extract extra revenue from consumers.

4. Going retro will be more difficult. Once the rules take effect, card companies will no longer be able to penalize you immediately for being late through a higher interest rate. Card holders will have a 60-day grace period before the lender can retroactively apply a higher rate to existing balances.

5. Money saved for good behavior. Even if you do fall more than 60 days behind, you'll be able to put yourself back in the good graces of your lender, thanks to the new bill. Card companies will have to restore the previous, lower rate after the borrower has made his or her minimum payment on time for six consecutive months.

6. Bait-and-switch tactics are over. As The Wall Street Journal Online mentions in its Washington Wire blog, card issuers will not be allowed to raise rates during the first year an account is open; so-called "promotional" rates will still be allowed, though they'll need to last a minimum of six months.

7. 5 o'clock is quitting time again. Ever found it absurd that card companies require your payment to make it to them by 9 a.m. or 12 p.m. on the due date? I sure have. Thankfully, as Ron Lieber of the New York Times reports, the new rules state that if your payment arrives by 5 p.m. on the due date, it must be considered an on-time payment.

8. Giving credit the 'ol college try will become harder. The Senate bill requires those under 21 who want to open a credit-card account to first prove that they can repay the money -- or that a parent is willing to be on the hook for junior's debt. Say so long to those freebie towels and water bottles that had become staples of the on-campus experience.

9. Magnifying glass no longer required. Lieber's New York Times article notes an interesting provision of the House's credit-card bill. Though it isn't explicitly included in the Senate bill that passed today, it could end up in the final legislation that crosses the president's desk: No more fine print. Card companies will be required to print their applications and disclosure statements in 12-point type or larger.

10. New tricks and traps are just around the corner. Joshua Frank of the Center for Responsible Lending says it well, in an article published yesterday by Marketwatch's Ruth Mantell:

"I think we'll see more fee gimmicks and ways to get around the rules, adding fees to customers who card issuers are not finding as profitable as they want,"

After all, it's the American way...

What do you think of the new credit-card bill? Has Congress gone far enough, or do American consumers deserve even more relief? Sound off here.

Message Edited by Anthony_Catalano on 05-19-2009 06:17 PM