Transcript Credit Card Act of 2009 & You Everyone will need to rebuild their credit score.

Credit Card Act of 2009
& You
Everyone will need to rebuild their
credit score
Important Credit Score Issues
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Credit History
Percentage of Credit Used
Payment History
New Request For Credit
Consumer Rights Before 2010
• Dispute the Purchase
• No Liability for Fraudulent Purchasers
• Control over Payment Options
I am writing to dispute a billing error in the
amount of $______on my account. The
amount is inaccurate because the
merchandise I ordered was not delivered.
I ordered the merchandise on (date) . The
merchant promised to deliver the
merchandise to me on (date), and the
merchandise was not delivered.
Abuses That Led to 2009
Credit Card Act
• Universal Default
• Changes in Billing Cycles
• No Changes without Adequate Notice
– Interest rates
– Fees
– Cash transfer charges
Three Major Dates
• August 2009
• February 2010
• July
2010
August 2009
• Credit Card Companies must provide written
notice to consumers 45 days before:
– Increase in Annual Percentage Rate
– Change of terms on the account
– Change benefits or “Rewards” structure
August 2009
• The same notice must inform the consumer of
their right to cancel the card account BEFORE
the new interest rate goes into effect.
• All open ended consumer credit accounts
must mail or deliver periodic statements
21 days before payment is due.
February 2010
• Retroactive interest rate increases are banned
unless the cardholder is more than 60 days late.
• Payments exceeding the minimum payment are to be
applied to the balance with the highest rate or pro
rata among all balances
• If your interest rate has been increased your account
must be reviewed after 6 months
• If you have paid on time the interest is returned to
the previous rate
Feb 2010 Continued
• Interest rates cannot be increased during the first
12 months.
• Teaser or promotional rates must last 6 months
• The issuer must tell you all interest rates that will
be applied to the account at the time it is opened
– The initial rate may expire. You must be told the final rate
and if that rate is a variable rate
February 2010 Continued
– After the first year the bank can increase the
interest rate for new transactions after giving
days notice
– The bank may increase the rate if a minimum
payment is received more than 30 days late
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• No universal default or double cycle billing
• No “over credit limit” fees unless specifically
allowed by the consumers
2010 Feb One more time
• Bill to be sent at least 21 days before due
• Payments received by 5 P.M. credited same
day
• Enhanced consumer disclosure
– How long to pay if only the minimum is paid
– Total cost if only minimum is paid
– Clear late payment date and time
Subprime Credit Cards
• It is subprime if
– Upfront fees must be paid
– Tied to savings or checking
– Credit Limit fluctuates with the balance of the
linked account
– Has a very high interest rate
Rules for subprime credit cards must be disclosed
Protection of Young Consumers
• Credit Cards cannot be issued to someone
under 21 years of age without a co-signer
and/ proof of income
• Under 21 years of age a co-signers permission
needed to raise limit
• No pre-screened credit card offers unless they
opt-in
July 2010
• New format for the summary table
• Creditors must disclose the duration that
penalty fees may be in effect
• Simplified disclosures on costs, variable rates
and grace periods
• Revisions to periodic statement format
• Must disclose “Effective Annual Percentage
Rate”
So What
• Changes in Rules = Actions by Creditors
• Actions by Creditors = Changes to Consumer’s
Credit
• Changes to Consumer’s Credit = Change in
Credit Score
• Changes in Rules = Change in Credit Score
• Project that Credit Scores will decline
• Cost of Credit goes up
What’s a Consumer to Do
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Pull free credit report
Verify status of all accounts
Dispute all mistakes
Make sure debt equals less than 25 to 30% of
amount of credit available to you
• Try to keep oldest and best accounts open
• Begin a rebuild immediately
• New turn around time is 2 years
Gift Cards
• Gift cards must be active for at least 5 years
• Fees must be disclosed to buyers
• No dormancy or inactivity fees unless the card
has been inactive for a 12 month period
• Cards that expire after 5 years the terms must
be clearly disclosed
Websites
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WWW.fdic.gov
WWW.whitehouse.gov
WWW.DSEF.org
www.bankrate.com/calculators/credit-scorefico-calculator.aspx
Book by Maryland Money Team
[email protected]