Thinking Money | Free Financial Advice and Tips

Credit Card Reform have began with mixed response

Posted on 28. Sep, 2009 in Credit cards, General News, Saving money

Last Friday, Credit Card companies began adjusting to new ways of doing business. First new rule: they will now have to notify their customers not less than 45 days ahead of any interest rate increases unlike previously when only 25 days advance notice was all that was required. Customers who are not happy with any changes in the interest rate are free to close their accounts and pay their remaining balances based on the old interest rate.

Rule number two: card companies will now have to post bills to customers 21 clear days before payment is due instead of the previous 14 days.

These rules are only the first set of the new regulations. The remaining far-reaching changes will start early in 2010 when the credit card act goes into full force. The law will restrict the conditions for card companies to raise charges and will require companies to pay off a customer’s highest interest rate debt first before a new credit is given, and many more changes.

Mixed reactions

While consumers are happy with the reforms, the banks are not and have threatened to increase interest rates and fees, cut down on card benefits and other measures before the credit card bill goes into implementation next year. There are reports some consumers are already suffering from such reactions from card companies.

The question is, is it legal? And why was there not a technical backstopping mechanism put in place to ensure that banks could not raise the figures to certain levels before the implementation of the act in February 2010?

Key Beneficiaries

The reforms actually target to protect consumers who are currently under much pressure to pay off their debts and while in the middle of doing this, the interest rates and other fees are being increased arbitrarily by their banks

A survey will be useful to determine the extent of the impact of the reforms on consumers and especially opinions on the actions by some credit card companies.

Perhaps, this is a real good opportunity for credit card companies to prove to consumers that they are there for win-win outcomes and not exploitative machines. Card companies which prove ethical and stay faithful to the reforms will stand to gain increased patronage which will pay off.

Indeed measures such as arbitrary raising of interest rates and fees and use of crafty terms are unethical and should be discouraged.

Consumers should ensure they research and understand the terms of payments adequately before taking a credit. A thorough check on the website of a credit card company like MBNA to see if they are one of the companies who have implemented increased rates and fees and other reactions to the reform will be a useful thing to do.

Another free advice to consumers is that, they have the choice on what to spend credit on. It is a smart thing to borrow to invest and not just to “consume”.