New credit card rules to protect customers enforced

According to Kenneth J. Clayton, American Bankers Association senior vice president, “The changes put consumers squarely in the driver's seat by restricting fees and requiring clearer rules and improved disclosures.

"We believe the new law will make it easier for consumers to understand and meet their credit obligations."

Recent changes to protect credit card users
Though, several provisions for credit card protections went into effect in February, some more changes like assessment of late fees, hike in interest rates and billing that will dramatically impact the use of credit cards, debit cards, and gift cards in America will be seen now.

To begin with, consumers can expect their February credit card statements to have a new look, such as providing more information about how long it will take to payoff debt as well as contact information for nonprofit credit counseling agencies.

The credit card company cannot charge a late payment fee greater than a cardholder's minimum monthly payment. This curbs the practice of companies adding a $39 late payment fee because the customer is a few days late on a $10 minimum payment.

Reasonable penalty fees
Under the new rules, credit card companies cannot charge a penalty fee of more than $25 in most instances.

Currently, the penalty fees on credit cards is about $39 but with the changes most late fees and over-limit fees for a second violation in six months will go up to $35.

However, the fee may be higher if the credit card company can justify that due to a cardholder’s late payment the costs incurred by it were more than $25.

The credit card company cannot charge a late payment fee greater than a cardholder's minimum monthly payment.

This curbs the practice of companies adding a $39 late payment fee because the customer is a few days late on a $10 minimum payment.

Moreover, companies can no longer charge a fee for dormant accounts. In other words, you cannot be charged a fee or have your credit card account closed because you don't use the card enough.

And lastly, credit card companies can no longer charge more than one penalty fee per transaction. Consumers will no longer face multiple penalty fees for the violation of a single late payment.

Re-evaluation of rate hike
In keeping with the new protection rules, the credit card companies are required to give customers 45 days notice before an interest rate hike.

If the company raises the annual rate they have to explain the reasons for its hike.

Banks must review a rate increase every six months to decide whether the increase is still warranted.

If the factors that prompted the hike are no longer applicable, the rate must be lowered.

In a move designed to prevent youngsters from accumulating debts they cannot repay, the credit card reform bill prohibits lenders from issuing cards to individuals under 21 unless they can prove they can make payments or get a parent or guardian to co-sign.