The 2009 Credit Card Act legislation passed this year goes into effect in February 2010. Recently the House of Representatives voted to move the effective date up to December 1, 2009 in light of banks taking advantage and increasing fees in front of the new law. It is now waiting on the Senate vote. The act will prevent banks from unfair rate hikes, require banks to give full disclosure when rates do increase, and protects students from predatory marketing practices by credit card companies. The act also addresses gift card fees and expiration dates. Penalties for non-compliance range from $500-$5000 per infraction. Looking deeper into the new Credit Card Act legislation, it’s apparent there are other regulations in the bill that might not get as much attention but may affect consumers deeply as they work to get out of credit card debt.
Free Credit Reports
The newly passed legislation would require companies that offer free credit reports to customers to disclose that every consumer has the ability to obtain a free credit report on his/her own from the three major credit bureaus. The three credit bureaus are Equifax, Experian, and TransUnion. The Credit Card Act requires that companies offering free credit reports must disclose in their commercials in audio and video: “This is the free credit report provided for by federal law”. Some companies offering free credit reports will also sign you up for a free trial membership in their credit monitoring services. For example, the company Freecreditreport.com owned by Experian offers customers a chance to look at their credit report for free, with enrollment in their credit monitoring services.
According to the Freecreditreport.com website:
“With the order (of the free credit report) comes a free trial membership in TripleAdvantage(SM) Credit Monitoring. If you don’t cancel your membership within 30 days you will be billed $12.95 per month. If you are not satisfied you can cancel at any time to discontinue the membership and stop monthly billing, however you will not be eligible for a pro-rated refund of your current month’s paid membership fee.”
It is important for consumers to read the fine print of any free credit report offer. The Credit Card Act requires that all ads disclose that the only website for obtaining a credit report is www.annualcreditreport.com.
Financial Literacy and Education
New provisions in the Credit Card Act require federal agencies to find financial and economic education programs that can be presented to school aged children. It also requires finding economic education programs for low to middle income adults. A recent study by the NAACP people found:
• Card holders with household incomes below $25,000 with credit balances were twice as likely as households earning $50,000 and five times more likely than households earning more than $100,000 to pay interest rates higher than 20%.
• In 2004, 46% of very low income (under $9,999 per year) credit card indebted households spent more than 40% of their income to pay off debt.
The act also requires the Government Accountability Office to study the relationship between English fluency and financial literacy. The NAACP study found:
• 79% of Latino households carried credit card debt
• Approximately 15% of Latino cardholders pay interest rates greater than 20%
In addition to the customer protections laid out in the Credit Card Act, the bill also allows visitors to US national parks and refugees to legally carry licensed firearms subject to state laws.