Good news for customers who were trying hard to make ends meet during the beginning of this year came in the form of credit reforms that brought about significant relief.
The CARD Act that came into effect in February 2010 brought in its wake an elimination of certain fees associated with credit cards and curbs on adhoc increase in interest rates. Both these seemed to have a positive bearing on the consumers since there was a significant decrease in the number of defaulters in the month of April.
In the first three months of this fiscal year, a fall of 1.11% was noticed in the list of defaulters who were behind their payment by three months. Transunion, an agency that handles credit reports mentioned that this is a fall of 1.32% as compared to the corresponding period in the year 2009. The rate of delinquent accounts, which stood at 1.21% in the final quarter of the last fiscal year, also saw a drop. This rate, which was at its peak in the year 2008, prior recession varied from .50% to .75%.
The average debt on credit cards also saw a fall of 10.5% and stood at $5,165 as compared to the $5,776 at the beginning of the previous year.
The Director of consulting and strategy in the financial service unit of TransUnion, Ezra Becker said, "We seem to be headed in the right direction." TransUnion gathers its data from the customer records which number over 27 million. Close to 10% of the people in the database held by the company have active credit files. Becker clearly mentioned that the reforms on credit cards that were implemented early this year have had a positive impact on the consumers and are enabling them to make their payments of time.
If these reforms would not have come into effect, the banks would have had the liberty to increase the interest rates on the accounts of their card holders without giving them sufficient warning. This would have led to the increase in the minimum amount due on the card each month. However, with the new regulations coming into effect, banks have to give their card holders a 45 day notice period informing them about the pending change of interest rates. The fees being levied for late payments and also fees for spending over the limit have been curbed as a result of the new regulations, thus helping the consumers smile for the first time in years.