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Starting this week, the first phase of the Credit Card Accountability, responsibility and Disclosure Act (Credit Card Act) comes into force, requiring issuers give cardholders 45 days notice before raising their interest rates or make other significant changes to the other terms of the card and rsquo; s agreement. The new rule gives borrowers the choice to opt out of the increased rate and pay the balance off at the previous rate, while no purchase on the specific card. A second rule goes into effect requiring credit card companies to send out bills twenty days before the due date. These two new rules is the first of a series of new consumer protection to be phased in over the credit card law was adopted in May. All law changes will be effective in February 2010.
The coming changes will come after weeks of growing with the banking sector on the minimum monthly payments, interest rates and other charges to the credit card holders. Nessa Feddis, American Bankers Association vice president for card policy, said it was impossible to quantify how much of the industry's behavior is driven by the need to reduce the risk due to the weakened financial position of consumers or the rule changes included in the new bill. She admits that "an important part" of account closings are due to the new 45 day notice rule, a new conference call with reporters.
Before the bill goes into effect, the industry practice was to raise interest rates to consumers immediately after a breach, such as a late payment. Usually described in the fine print in the application, the borrower would then complain that they are hit with sudden interest rate increases and not given enough time to respond to them. The new rule does not allow issuers to base the immediate rate increases on these types of offenses by requiring 45 days notice of any significant changes in account terms. In addition, issuers will not be able to raise rates on an existing balance if a consumer is at least 60 days late. The requirement does not apply to certain card schemes, such as those with a variable interest rate based on a benchmark prime rate or an outgoing promotional rate that was described in advance.
The changes in the new bill will end "the tricks and traps business model that has been designed to get consumers to collect a lot of interest," said Ed Mierzwinski, leading financial services issues for consumer group US PIRG. Credit card industry, which strongly suggested the passage of the Credit Card Act applicable law will make it much harder for them to deal with losses from the riskiest borrowers, forcing the cost of these risks to spread across all cardholders. This feeling was summed up by Ms. Feddis say, "Credit will be less available to consumers, their limits will be lower and they will pay more for credit." She added that the new rules will force issuers to innovate, but it is not yet clear how. Walking annual fees, cutting grace periods, eliminating benefits and rewards programs are all on the table, she said.
Credit card holders should check their incoming statements of possible interest rate increases and other changes that go into effect before the regulations. If you get the hikes in rates, fees or payments, check your contract to see what your rights when it comes to close the account. If the increases in your account will drive your monthly obligations beyond what you can pay, you and rsquo; ll need to take action quickly. For example, Chase is already in the process of raising their minimum monthly payment for a portion of their cardholders from 2% to 5%, an increase that will challenge many of these borrowers immediately.
Start looking around for promotional offers that & rsquo; s inevitable that some credit card issuers will try to attract cardholders who want to make a move in the current situation. Be sure to get the details, such as how long a promotional rate, in writing.
If you currently carrying a low credit score to transfer your balance to another issuer can be difficult, if not impossible. . If a transfer is not an option, you're fighting now, and higher payments looming, into a debt settlement process can be your best course of action
Debt settlements carries several benefits to borrowers:
An immediate reduction of approximately 50% on monthly payments for each account rolled into settlement
Accounts can be included in a debt settlement, credit cards, department store debt, medical bills, unpaid utilities, etc.
The balances on each account in debt can often be negotiated down by 40% to 60%
timetable to pay off the negotiated debt in full is flexible and based on the borrower and rsquo; budget.
Typical payment plans to be 18 to 48 months
The results of the debt settlement companies can vary greatly, so it & rsquo ;. is important to work with someone you can trust. Be sure that the company is an accredited member of the Association of Settlement Companies (TASC) and they have a long history of successful debt settlements. Interview them and ask enough questions to see if a debt settlement plan and the company will negotiate that's right for you
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