On August 20, 2009, the US passed a new credit card law that imposes restrictions on credit card companies to help consumers obtain fair treatment from their creditors.  The changes introduced through this law represent the biggest change to the lending practices of credit card companies in over 20 years.

One of the changes is that lenders must now give customers at least 21 days to pay their bills.  Customers now have more time to make their payments after receiving their bills.  The previous requirement was 14 days.  The new law also requires credit card companies to give 45 days’ notice before making changes to the terms of a customer’s account.  The law previously required 15 days’ notice.

Under the new law, if a creditor makes changes to the terms of service for a customer’s account, the customer can opt to close out the account rather than accepting the new terms.  Also, beginning in February 2010, restrictions were imposed on credit card companies marketing cards to college students, raising their interest rates, and imposing new fees on existing accounts.

Credit Card Companies React to the Changes

Of course, you can’t expect the credit card companies to take these changes lying down, and they aren’t.  Many companies took advantage of the gap in time between the passage of the law and when it went into effect to boost their annual fees or add new annual fees to accounts that didn’t have them previously.  In addition, Fifth Third Bank started charging its customers $19 monthly for accounts that had no activity for twelve months.  Some people say that credit card companies should charge for inactive accounts because it costs them to maintain the accounts.  However, if no charges are being made, the only cost to the company is the cost of sending a statement showing a zero balance once per month.  That certainly doesn’t cost anywhere near $19.

Although it is better for consumers to pay off their credit cards in full each month, this does not represent the ideal situation for the lender, since they are in business to make a profit.  Therefore, credit card companies are looking for new ways to profit from these unprofitable accounts.  No matter how many laws the government passes attempting to regulate the credit card industry, it is likely that companies will keep trying to come up with new ways to get more money out of their customers.  It seems that the government will always be at least one step behind, and it is the consumer who ends up paying the price.

The credit card law that went into effect on July 1, 2010 made a lot of progress toward curbing some of the greedy practices engaged in by credit card companies.  However, the industry had a lot of time to get ready for the changes and create new fees before the law went into effect.  As a result, many consumers have been hit with rising interest rates, decreased credit limits, and changes in their due dates.

The changes in the credit card law were approved by Federal Reserve regulators, representatives from the Office of Thrift Supervision, and the National Credit Union Administration.  These organizations helped to ensure that the practices set forth in the new law are fair to the consumer, since many practices engaged in by credit card companies are clearly not fair.

The new rules for credit cards are intended to protect consumers from the practice of double-cycle billing and set limits for the raising of interest rates by credit card companies.  The new law also sets a longer grace period for paying payments, extending it from 14 days to 21.  Another change requires credit card companies to apply payments to debt with a higher interest rate first.  However, the 2010 credit card rules do not apply to everyone equally.

Commercial Credit Card Holders

Business owners who use commercial credit cards do not receive any protection under the new credit card law.  This is because they are not considered consumers.  Business credit cards, whether for a small business or large, are not entitled to the same protections granted to consumer credit card holders.  Some business owners fear that credit card companies may attempt to make up for the changes in consumer credit card rules by increasing the fees on business credit cards.

Those Returning from Military Service

During a February 2010 teleconference in which representatives from the National Credit Union Administration, the Federal Reserve, and the Office of Thrift Supervision answered questions about the 2010 credit card rules, someone asked a question regarding how the rules apply to returning military personnel.  The “Service Members’ Civil Relief Act” requires credit card companies to reduce the interest rate on deployed military servicemen’s credit cards to 6% while they are away from home.  This reduction is temporary and the rate returns to normal following the serviceman’s return from deployment.  The questioner asked whether the rule restricting the amount that credit card companies are allowed to increase rates will prevent the companies from returning these reduced rates to the normal rate following deployment.  This question stumped Benjamin Olson, attorney for the Federal Reserve, and is being reviewed.