While the American economy operates wholly on institutionalized credit, most people do not fully understand how it works. Because of this, companies who issue credit have been able to take advantage of public ignorance and alter policies as they see fit. Until only very recently, this practice was accepted as a matter of business, but President Obama's administration aimed to tackle this problem as one of the first, most urgent matters of business. This is how new credit card act 2010 breaks down:
Changes to Interest Rates
Credit card companies are now being monitored for inexplicable and sudden changes to your rate. Even if you are on a variable rate and you might expect this could happen, lenders were not required to notify you of changes. Under the new ruling, prohibits credit card companies from changing your rates without at least 45 days of notice. However, if you signed up under a variable or promotional that is set to adjust on a specific date, you already know this and they do not have to notify you. Companies can also change your rate for a variety of reason but they must always allow at least the 45 day grace period.
Changes to Fee Allocation
The new regulations prevent credit card issuers from issuing you fees out-of-the blue. Under the new law, you are the only person who can allow over-the-limit fees, which is something that you determine when you sign your contract. In this case, though, the fees that they allocate to your account must be reasonable; perhaps an additional monthly installment charge or a flat percentage.
Changes to Universal Default
Similarly, universal default practices allowed companies to change your rates based on factor and influences that are unrelated to your account. Basically, credit card issuers would monitor your behavior in regards to other types of liabilities you might have, like utility bills and based on how you pay them, or failed to pay them, they could change your rates. Apparently the belief is that since you cannot pay your other bills, you won't pay your credit card bills either. New credit card law 2010 does not put an end to this, but it does throw these changes under the same umbrella as basic interest rate changes and gives you a minimum of 45 days notice to get things straightened out.
Changes to Balance Priority
Most cards have different interest rates applied to the different kinds of card activity. For instance, many cards advertise a low APR for balance transfers, sometimes even 0% for the first 12 months. This is meant to attract you to their business, but they aren't telling you that your cash advance rate and new purchase rates are in the teens and twenties. When you apply payments to your account, they will pay down the balance on your transfers first, so that you are still paying very high interest on the rest of your account. New credit card act 2010 rules force card issuers to pay down your highest interest balances first, as long as you pay more than your minimum amount due.
Changes to Subprime Lending
The subprime market allowed anyone to get access to credit, even if they weren't necessarily qualified. In consumer credit, this typically took the form of secured cards, in which you supply a down payment in order to get credit, similar to a prepaid card. When there is a fee involved, predatory companies could take advantage of you, charging ridiculous amounts just to open your account. This won't happen under the new laws, as they restrict lenders to 25% or less of your available limit in the first year. This can change, however, after the first year, and since these types of accounts are typically a big bank liability, they will probably try to find new ways to get that security deposit out of you anyway.