Credit Companies Beating The Credit Card Bill Early With Easy Loophole

Credit card companies are making changes early to prepare for the coming activation of the credit card bill. The credit card bill, a long awaited set of regulations for the credit industry aiming to level the playing field for creditors and credit card holders, was signed into law last May after a being fast tracked through Congress.

The bill was passed with strong support from credit card holders and their advocates, many of whom expected a better credit landscape once the bill became active. That may not be happening anytime soon. In fact, things have gone worse for credit card holders since the bill was passed.

One of the most controversial amendment in the credit card bill is the legislation that will limit the ability of credit card companies to raise their interest rates which are, at the moment completely arbitrary and according to their whims. The credit card bill was not made active the moment it was signed to give time for credit companies to adapt to the new regulations. The scheduled full activation of the credit card bill is on February of next year. Unfortunately for credit card holders, credit companies are treating the window of time they’ve been given as an opportunity to jack up their profits and find new ways of maintaining their profit margins once the bill becomes active. This is why credit card holders are seeing their interest rates and soar sky high while new fees are being added. Credit is also being cut drastically. And now credit card companies have found a loophole in the credit card bill which may negate the effectiveness of the bill in preventing arbitrary interest rate hikes.

The credit card bill contains provisions against arbitrary rate hikes, true. However, said provision is only applicable for fixed interest rate credit cards, not for variable rate ones. So now, major credit card companies, among them Bank of America and JP Morgan Chase & Co. are moving their credit card holders with fixed rate interest rates to variable interest rates to exploit this loophole. By doing this, credit card companies retain their ability to arbitrarily change a card holder’s interest rate even with the credit card bill already active.

Many credit card holders are now being notified that they are being changed to a variable interest rate. Most companies do not allow credit card holders to opt out of the change. The only available option for credit card holders is to cancel their credit cards if they do not want to move to a variable interest rate setup.