There’s good news and bad news for consumers about what banks can do now that long-anticipated changes to credit card laws have taken effect on February 22, 2010. Sneaky policies that allow changes in interest rates on existing balances, changing due dates for payments, and unauthorized fees if your card goes over the limit are a few of the pro-consumer benefits from the new laws.
An industry that “earned” 70% from interest, 20% from merchant fees, and 10% from fees - $15-20 billion in 2009 for fees alone, - is not likely to take this loss of potential income lying down. In the months before the changes took effect, banks lowered limits and canceled cards, while imposing new fees; the future holds even more of this. Banks can still increase interest rates on new balances with 45 days’ notice, as well as institute new annual fees and other fees for services - or even for not using your card. Meanwhile, new credit lines for those with bad credit will be harder to come by.
Jean Ann Fox, financial services director of the Consumer Federation of America, notes that banks could make changes to the way they post withdrawals to your account, so that deposits are posted last – causing costly overdraft fees. They are also likely to promote costly cash advance services.
Some ways the banks compensate will be costly to consumers, but there are some other good changes:
- Banks can’t set up shop on college campuses and sign up penniless students for cards they can’t afford.
- Banks must mail your statement 21 days before the due date.
- If you are current on your account, the bank cannot raise your rates because you are behind on another account.
- Banks must provide 45 days notice of new fees and interest rate hike on new purchases.
- You can opt out of fee changes and pay off existing balances over five years.
- Banks can’t raise your rate during the first month.
- If you are offered a card with fees to start it up, the fees cannot exceed 25% of the available credit.
The very laws intended to make credit laws fairer for consumers may encourage a whole new era of bank sneakiness. Adam Levin, chairman of Credit.com, said some banks have been experimenting with envelopes containing legally compliant notices of interest rate and fee hikes that look more like the type of junk mail customers are likely to pitch.