Credit Card Rules » 3 questions about credit card reform
In May 2009, President Barack Obama signed a massive reform bill into law known as the Credit Card Accountability, Responsibility and Disclosure of 2009, or Credit CARD Act. The provisions rolled out in three major stages and, among other changes, affected issuers' ability to hike rates on existing balances and issue cards to young consumers.
Readers were bound to have questions about such a complicated law. Bankrate.com compiled three of the most frequently asked questions about the CARD Act from its Credit Card Adviser column. Questions and answers were edited slightly for length.
Do issuers have to lower raised rates?
I got hit with the universal default clause on some credit cards a few years ago when I ran into a financial bind. Based on the new rules that took effect Aug. 22, it looks like they will be forced to review my accounts. My question is, what is the criteria on how much my rate should decrease based on my good recent payment history? Is there specific criteria in the bill that lays out if rate is x, and payment history is y, then new rate is z?
An additional concern is that I've read that the review applies to rates increased after January 2009. My problem is that my rates increased in 2008. Does that mean they don't have to lower my rates, even if I haven't been late or over my limit for more than 18 months?
The provision you're referring to in the CARD Act does require issuers to review rate increases every six months to determine whether the APR should be lowered. As you mentioned, however, it only applies to rate increases that took place on or after Jan. 1, 2009. Your rate hikes are not covered.
The law doesn't require issuers to decrease the rate by a specific amount if a review of the factors indicates that a rate reduction is necessary. In general, the issuer can either examine the factors it based the rate increase on, or the factors it currently looks at to determine the APR that new customers receive. If the review shows that the reasons for the rate increase have improved, then the issuer must lower your rate within 45 days after completing the evaluation.
Can my rate increase after one delinquency?
What I would like to know is: Can a creditor raise your APR for being only 30 days late? Many articles say it can't until you are 60 days late, but others say that it can when you are 30.
An issuer cannot raise the interest rate on an existing balance if the cardholder is just 30 days late with a payment. The CARD Act prevents credit card issuers from hiking the interest rate on an existing debt except in four circumstances. One of those exceptions is if the payment is 60 days past due.