Published by Mark

New Day Dawning For Credit Card Debtors

January 2, 2009 at 11:40 am

How credit card companies act is a matter of great importance to me as a bankruptcy attorney in Indiana. I help clients deal with credit card debt problems along with their medical bills, mortgages, and car loans. Back in May of this year, I began following proposals in Congress to fight abuse by credit card companies. Now, six months later, regulators have actually adopted new credit card rules, which will go into effect in a year and a half.

According to the Indianapolis Star, these new rules were approved by the Federal Reserve, the Treasury Departments Office of Thrift Supervision, and the National Credit Union Association. The goal is to protect consumers from arbitrary interest rate increases or inadequate time to pay bills.

This is a huge area of concern, with American credit card debt up to $850 billion, four times what it was in the early ’90s. As I’ve explained in earlier blogs, the real creditors are the banks, rather than the 16,000 or so credit card companies themselves, such as Discover, Visa, Mastercard, and American Express.

The new rules are many, but their main provisions include:

– Payment cannot be deemed late until 21 days after due date
– Payments above the minimum must be applied to that part of the debt with
the highest interest rate
– No double cycle billing (unfairly calculating balances)
– 45 days’ notice of interest rate changes (vs. 15 days now)

When I first began discussing the credit card reform proposals in my Indiana bankruptcy blogs (see Can the Cavalry Deliver Credit Card Help?), I expressed my concern that while the new rules might provide relief for borrowers, it will become more difficult for people with less than perfect credit records to obtain credit in the first place, helping push more and more people in the direction of foreclosure and bankruptcy. That’s still a concern I have, because the new rules are bound to eat into the profits of the credit card issuers.

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