Today, President Obama signed the consumer Credit Card Bill of Rights into law. What does it mean to us consumers? Here are a few of the things it covers:
• Creditors cannot increase the annual percentage rate (APR) during the first 12 months of opening up an account.
• Creditors are required to provide consumers with a 45-day advance notice of changes in rates and significant contract changes. Rates that change due to a change in the index that the rate is based on are excluded from this 45-day notice requirement.
• Creditors cannot change the rate on existing balances.
• Promotional rates need to be in effect for at least six months from the beginning date of that promotion.
• Creditors need to provide a 30-day advance notice of an account closure.
• With certain exceptions, credit card issuers are prohibited from charging a finance charge based on the double billing cycle method.
• Creditors are prohibited from charging a fee on an outstanding credit card balance at the end of the billing period if the fee is attributed to the interest accrued on an outstanding balance that was fully repaid during that preceding billing period.
And there's more. Pretty impressive to get this passed in such a short period of time!
But what about the dreaded Unintended Consequences?
Hampering the banks' ability to do "risk-based" pricing (ie charge a higher interest rate for riskier consumers), tampers with the bottom line. Chances are, publicly traded banks which have investors to answer to, will make up that profit difference by raising everyone's rates and fees, cutting lines of credit and generally making credit less available to us all.
Oh, and the law doesn't take effect for another 9 months, so plenty of time for the banks to "behave badly" until then.
