No Fee Regulation, No Interest Cap On Credit CARD Act

The credit industry is preparing for the massive changes that this new Credit CARD Act will bring. For those who are not aware of it, this new legislation is aimed at keeping credit card companies from profiting too much from their customers. This Act introduces a number of regulations which will block the abusive and predatory tactics credit card companies have used on card holders during the past few years. This law is, however, not without its loopholes and credit card companies have been very willing to exploit them.

In general, this new legislation does bring a lot of benefits to consumers. However, there are a lot of details that could lead to unpleasant surprises if consumers are not aware of them.

One of the major areas that this new credit card legislation focuses on is how credit card companies handle credit card interest rates. The act puts a lot of effort to contain this ability of credit card companies to arbitrarily raise their interest rates. However, this law has some flaws. For instance, there is no limit placed just on how high credit card interest rates can go. While the law only allows interest rate of existing balances to go up only if the card holder is 60 days late on his or her payment, credit card companies may still raise interest rates on future purchases whenever and for whatever reason they want. They do have to inform card holders of their intentions to do so, however, and inform them that they, the card holders, can opt out of this change. That notice will most likely be sent through an envelope meant to look like junk mail, though. Consumers had better be careful with what they throw out.

Another area where the Credit CARD Act seems to have dropped the ball is in limiting what fees companies can charge. There are some regulations on severity of penalty fees that card companies can impose on holders, but the act does not have regulations on just how many fees or what type of fees they can charge. Companies are therefore free to make up whatever fee they want to charge and how much they want to charge for it. In fact, they are already busy doing this. Card holders are already seeing annual fees for credit cards that do not even need them. There are even charges coming out for statements printed on paper and for credit cards that remain inactive for a certain period of time.

Experts say consumers can expect to see more of these in the future and the best that consumers can do is to keep a tight watch on any mail they get from credit card companies.