Credit Debt Relief – Understanding New Laws and Regulations on Credit Card Companies in 2010

Credit card debt relief has been one of the main areas of focus for the federal government in the past couple of years. Out of the many laws and regulations on credit card companies introduced by the government the ‘Credit Card Accountability Responsibility and Disclosure Act of 2009 is of considerable importance. This act has taken effect from end week of February 2010.

The malpractices adopted by the credit card companies to increase their returns are not unknown to the people in general. These practices tend to increase the total outstanding amount of the debtor. The new law attempts to provide debt relief to the consumers by restricting retroactive rate increases and issuing a ban on double cycle billing.

The Credit Card Accountability Responsibility and Disclosure Act is supposed to amend the Truth in Lending Act and also attempts to do away with the unfair and deceptive practices of the credit card companies. This brings down the debt burden of the consumers and prevents them from further defaulting.

There are many who are very happy with the new laws and regulations on the credit card companies. But there are many who believe that it will do more harm than good. Because of the restriction of retroactive rate increases the credit card companies will have to give up on a chunk of their profits. Being used to making as much as they do, the company will in turn find other avenues for rate increases to make up their losses. This involves a major bending of the law.

Under the new law the issuers are supposed to give a 45 days notice for rate increases to the consumers and in the first 12 months of issuing the card there should be no increases made. This may come as good news to new card holders but the ones who have been paying their dues regularly for years will find their charges going up (e.g. annual fee increase).

Other increases that the company charges to make up their loss are by increasing various fees (e.g. late payment fees). For example, for simple defaulting where the consumer used to pay (say) $35 will have to shell out $50.

There are other ways by which, the losses incurred because of the new laws and regulations on credit card companies are made up at the cost of the consumer. The annual fees and the transaction fees of the consumers can be increased very easily by providing a 45 days prior notice. Drastic changes have been made by the companies in the calculation of minimum amount payable by the consumers. In certain companies it has been increased by more than 50%.

For example if a consumer has $10000 as balance, he had been paying a minimum amount due of 2% i.e. $200. The companies are now in a position to increase this 2% to 5% which will result in the consumer paying $500. Therefore, the consumer ends up paying $300 more every month that he could otherwise have saved. This sudden increase may cause the consumer to default.

So, it can be seen that while the new law attempts to provide debt relief to a section of consumers, it increases the debt burden on the others. This too can be controlled if the credit card companies for the time being settle for lesser profit for greater goo

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The Law and Ignorance

They say that Ignorance is no excuse for the law and yet many who break the law use this as their first excuse? But Officer; I did not know that 90 mph in a school zone was illegal here? Yah, sure, step out of the car turn around and put your hands behind your back.

Recently an Online Think Tank took up this issues as one member recalled a recent conversation about this very fact in which the other party went into a near tirade about how ignorance was a reasonable excuse for accidentally breaking the law. In fact, he stated;

Dear Sir, your comments about ignorance and the law are of interest in that the real problem is that things like the Motor Vehicle Code, Building Codes, OSHA laws etc are so voluminous that no one but an idiot savant could know them. The lawyers, policemen, judges, why they are forever looking it all up themselves. It is completely silly as so many of the laws get so out of control that they cross the lines of common sense.

So, then you have applied your own common sense to the senseless over regulation and rules I see. Which is fine, until human nature intercedes and someone desires what you have and uses those laws to stifle your best efforts. I hear what you are saying there. Indeed, we need to have a “red magic market” committee to eliminate the complexity the crushes creativity and innovation out there.

Of course the debate rages on and so do the lawmakers and so the citizens are lost in fear of breaking laws they have no clue about. In any case I certainly hope this article was food for thought and of interest to you to propel your mind in 2007.

“Lance Winslow” – Online Think Tank forum board. If you have innovative thoughts and unique perspectives, c

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