Credit card reforms - do these rules offer the required protection?

Last year`s credit card reforms have brought about a lot of changes in the credit card industry, and most of the benefits are aimed at providing consumers relief from unwanted hikes etc. The flipside to this is that in spite of these reforms aimed at consumer protection, cardholders are still getting into unwanted trouble the old-fashioned way by spending beyond their means.

Commenting on the Credit Card Accountability Responsibility and Disclosure Act, 2009, Janie Alegria, service coordinator at Rio Grande Valley said that although there are a lot of good things in the Act for consumers, they still need to be educated while using a credit card facility or any other credit product. One has to be well versed with the terms and conditions.

Among the many regulations in regards to consumer protection, there are restrictions on the increase in interest rates during the first year after the credit card is obtained, as well as on the hike in interest rates on existing balances. There are also limits on penalty interest and fees, providing sufficient notice on the due dates, as well as consistency in payment due dates etc. There are restrictions on the issuance of credit cards to young adults below the age of 21 without a co-signing authority. Alternately, they will be required to provide proof of independent income. Issuers will also not be able to give away freebies to entice young adults and students, or process credit card applications in schools and colleges.

There are also restrictions on the double cycle billing practices. This is a clever ploy to penalize consumers who occasionally carry their balance forward, compared to the ones who used the revolving credit facility on a regular basis.

This is a welcome move, especially concerning young adults, as credit card companies can no longer enforce arbitrary payment due dates nor can they keep changing due dates every other month. Consumers are a relieved that the due date will remain constant every month.

There is a regulation as per the new law, with regard to the inactivity fees, expiry dates on gift cards, etc. Consumers will also have a reasonable option to pay off the debts.

The best feature of the card regulations, is that credit card companies must provide detailed information on how long it would take a consumer to pay off their debt by only paying the minimum due every month. This could seriously jolt the consumer out of their senses, as they will now realize that they could be saddled with debt for many years to come.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.