Page 38 - Book1E

30
Too Much Credit
The recent economic crisis and increased job losses caused many con- sumers, even consumers with good credit records, to skip payments and ultimately default on their credit cards. Consequently, banks lost tens of billions of dollars. Changes that have needed to be considered for a long time finally were agreed upon and approved by the Federal Reserve, the Treasury Department’s Office of Thrift Supervision, and the National Credit Union Administration. The changes are the most sweeping restrictions imposed on the credit card industry in many years and are aimed at protecting consumers from being hit by random inter- est rate increases and preventing them from lack of adequate time to pay their credit card bills. They also restrict credit card companies from allocating all of your monthly payment to the balances on your card that have the lowest interest rates. Before the rules were put in place, if you transferred a balance at a 5% interest rate and had an existing bal- ance at 19% interest rate, your monthly payment would all go against the balance with the 5% interest rate while your existing balance con- tinued to grow at a 19% interest rate, sometimes causing your overall balance to get larger instead of smaller.
Most aspects of the Credit CARD Act became effective on February 22, 2010 and all changes were made by June 30, 2010. However, the following two provisions became effective on August 20, 2009.
The first of these provisions requires that credit card companies allow 21 days for consumers to pay their credit card bills, and the second provision requires that credit card companies provide 45 days notice when there are changes in account terms.
The biggest credit card companies in the U.S. include Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co., and HSBC Holdings. Altogether, nearly 16,000 companies issue credit cards in the States. The Associated Press reports that the new rules could cost these companies together more than $10 billion a year in interest payments. Not all companies will be affected by all the rules. Some companies