Credit Card Companies Bigger than the Law?

For the past 30 years or so, credit card companies have been operating like a sovereign ruler. They have the authority to charge their customers outrageous charges and penalties, while simultaneously increasing interest rates to levels that shock even the most financially sound person. (Not to mention the unbalanced revisions done to credit card agreements that only benefit the provider.) Credit card companies have made billions off the backs of their customers by creating new streams of income anytime they deem fit.

Finally, the Federal Reserve is fighting back against the nearly self-governing industry. The Fed has passed new regulations that will provide consumers with protection from this out-of-control tyrant, the credit card companies.

The new regulations, known as the “Credit Card Bill of Rights,” will not go into effect until July 1, 2010. Below you will find a description of some of the changes.

Window of Opportunity

In the past, some credit card providers would mail billing statements as close to the payment due date as possible. This practice caused some customers to send credit card payments after the due date, which resulted in late charges and other penalties. Some of the customers affected by this practice believed the credit card providers did this intentionally. The Federal Reserve seems to have sided with the credit card customers; When the new regulation goes into effect, your credit card provider must allow a 21-day window between the billing date and the payment due date. This window of opportunity provides you enough time to submit your credit card payment in a timely fashion. If your credit card provider does not adopt this new policy, it cannot charge you a late fee (or any other penalty fee) if it doesn’t receive your payment by the due date.

Layman’s Terms

Currently, credit card providers hide the consequences of minimum payments, over-the-limit fees, and interest hikes within credit card jargon that most customers do not even read or much less understand. However, the new regulations require credit card providers to clearly display in “reader-friendly” terms the penalty for committing such actions. Check out how future credit card statements will look here.

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No More Universal Default

Now, credit card providers can hold you responsible for missed or late payments—even if the financial discretion was with a different financial institution or other creditor. For example, if you paid a car note or utility bill late, your credit card provider could consider you a credit risk and raise your interest rate because of “universal default.” The Federal Reserve’s new rules will put an end to this practice. After July 2010, credit card providers can only hold you accountable for delinquencies that happen on your account with their financial institution.

These are just a few of the credit card changes you will see next year (you can find others here).

These new credit card regulations will not solve all the problems faced by credit users. It is ultimately the responsibility of consumers to understand the agreement they enter with a creditor and to pay their bills on time—especially if they know that failing to do so will cause financial hardship. But at least the new rules will help keep the credit providers’ tyrannical tendencies at bay.

If you would like to see the government do more to keep credit card companies in check, consider signing the U.S. Public Interest Research Groups (PIRGs) petition. This petition is aimed at supporting additional legislation currently making its way through the Senate. The Senate bill is along the same lines as the Federal Reserve’s, but would be enacted sooner than July 2010 and also poses stronger restrictions on creditors.


This guest post was contributed by LaShon Fryer. LaShon is a freelance writer and blogger for business publications. When she is not writing, she is busy in her children’s apparel store Bring-2-Fruition. In January she will return to her alma mater, Temple University, to pursue her M.B.A. in Financial Management.

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