Johnnie George sought help from the Central Florida Community Development Corporation when he wanted to buy a house for his family. He is one of the millions of Americans who is in the depths of financial difficulties because of credit card debt.
George's card transactions quickly escalated because of surging interest rates and exorbitant fees. He had difficulty in paying off his debts, which added more interests over time. It was a vicious cycle he could not get out of -- until he asked for assistance.
At present, Mr. George has nearly nonexistent debt due to hard work and extensive cutbacks in his expenditures. However, he is only one of the very few people who could conquer their financial problems.
In 2008, Americans racked up around $927 billion in credit card debt based on a study conducted by the Nielsen Report, a financial journal. A New York Times article said about $20.5 billion of the said amount is made up of penalty fees.
These figures and this longtime clamor to regulate credit card fees served as impetus for the US Congress to pass the Credit Card Accountability Responsibility and Disclosure Act of 2009. The act was signed by President Barack Obama in May this year.
The CARD Act will monitor and control many aspects of how credit card companies treat more than 170 million card holders in the US. It will make alterations to the way card companies operate and prohibit them from raising rates without notice. Banks will now have to give forty-five days notice to customers of rate changes. Promotional rates now have to last at least six months. Excessive overdraft fees will also be prohibited under this law.
According to Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies, this act is a watershed bill and the first legislation aimed at consumer protection.
Opponents of the CARD act argue that the practices of the financial industry keep their systems going; hence, changes will adversely affect consumers.
Mr. Garuccio from the American Bankers Association says there will be a reduction in credit access once this law will be implemented. The US is now experiencing an economic recession, which is not a good time to constrict credit. credit cards are considered a lifeline for many people.
Another restriction under the said act is the credit card solicitation to those under the age of 21. Days of credit card companies camping out on college campuses may now be gone.
The Credit CARD Act also requires a disclosure in monthly statements. Companies will now explain to consumers the effects of paying minimum monthly payment and list interest and fees they paid.