What you should know about the new credit card laws
PORTLAND, Ore. – A new national credit card law takes effect in less than a week. What will that mean for you and your money?
First, credit-card users will be getting a new kind of bill with the new law. The new bills explain more about how much is owed and how long it will take to pay it all off. This is just one of many new things coming your way on Feb. 22.
For many in Oregon and across the U.S., it's due time. Now showing on YouTube is what some call a "debtor's revolt."
"I could get a better rate from a loan shark," said one unofficial member of the revolt.
Not an organized group but grassroots, these are people angry over credit cards – people such as Tom Geil of Portland.
"I have had it," said Geil, a credit in a YouTube video. "We keep talking about banks too big to fail, but I'm wondering if more citizens are concerned about banks too big to care."
Geil said he paid on time, every time. Nonetheless, his bank suddenly shut down his cards and dropped his credit limit when they found out he had lost his job.
"They have got our hands tied because, if you need a credit card..." he said.
However, consumer experts say the new law was written to help "untie" your hands.
"This is a great win for consumers," said Joe Ridout with the group Consumer Action. Ridout works with Consumer Action in San Francisco, which has a Web site designed to protect and educate.
"A lot of the most abusive things that credit card banks have done in the past now no longer will be permitted," Ridout said.
He said one of the most important things to know is that banks will no longer be able to make "retroactive rate increases." In short, they won't be able to raise rates on money you've already spent.
"This has really harmed a lot of consumers who had purchases, sometimes very sizable ones," Ridout said.
In the past if you bought, say, a refrigerator on your card for $1,000 at a 5 percent interest rate, companies could suddenly jack up your rate to, say, 30 percent. And it would apply retroactively to the entire balance - versus just the purchases made after the rate change. Suddenly, consumers with disposable cash to pay off the entire balance were being forced to pay a lot more.
"That's basically raising the price of goods after you bought them," Ridout said. "Now that will be illegal as of Feb. 22."
Under the new law rate increases would apply to new charges only. Consequently, that fridge purchased to qualify for 2009 energy-efficient appliance incentives, or the "cash for applicances" federal incentive, will still cost the same.
Meanwhile, credit companies in most cases must give consumers 45 days notice of changes. That way, consumers can make different plans if you don't like what they credit card company is offering.
Consumer experts say the new law will not make credit cards perfect. Companies still will be able to close accounts and lower limits, as they did in Tom's case.
However, now Tom – and others – will know more about what the companies are legally allowed to do, and how to answer back.
"Now I'm back to work and I've been changing banks," he said. "I'm not the only one in this boat, so-to-speak: there are so many people with the same problems with their credit cards."
The experts tell us credit card companies have been moving quickly to make changes before the law goes into effect. Here are the tricks credit card companies are using to get around the new laws – and how to use this information to your advantage.
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