New Credit Law Brings Problems Instead Of Protection For Consumers

Last May, Congress and the President made into law the Credit CARD Act of 2009. The act was created to stop the widespread unfair and predatory practices of credit card companies which was leaving many credit card holders buried in debt and also contributed largely to the economic crisis.

Before the Credit CARD Act had passed, credit card companies had already warned that the passage of the law would mean credit becoming more expensive for consumers. It seems that credit card companies are making good on their warnings.

Ever since the Credit CARD Act was passed, credit card companies have been changing their credit card terms to adapt to the new requirements of the upcoming law. Unfortunately, many of these term changes were made not to make credit cards much more cheaper and easier to bear for consumers but to secure the profit avenues of credit card companies and to find more ways to make profits to make up for the estimated 50 billion dollar losses that these companies face once the full extent of the Act becomes active.

Now, credit card holders are seeing their interest rates go sky high as well as their fees. New fees are also being added such as annual fees and dormant credit card fees. Credit card companies have also increased the monthly minimum payment rates and have lowered the available credit of many credit card holders, even those with good credit scores.

Fortunately for some consumers, last August, a provision in the Credit CARD Act allowed for card holders to fair notice before any significant term changes could be made on their credit cards. These provisions required credit card companies to give a 45 day notice to card holders if their credit card interest rates and other terms would change and to give them the choice of opting out of these changes.

Thus, when a credit card company hikes up their interest rates, they have to send notice 45 days before these changes actually happen. During that time, the card holder can opt out of the change. If the credit card holder does not opt out, then he or she gets the term changes. Otherwise, the term changes are not applied to them and they continue paying their balance with their previous interest rate. However, they will have to cancel their credit cards.

This basically forces credit card holders to vote with their feet, so to speak. If they are not pleased with the changes that their credit card is introducing, then they can opt out of the changes, close their credit cards and move to a better service. Well and good if the consumer has a good credit rating. However, for consumers with low credit scores, this could be quite problematic. Closing credit cards will impact negatively the credit score of the card holder as well.