Eight Changes to the Revolving Debt Industry

Eight Changes to the Revolving Debt Industry

In the spring of 2009, the administration of President Barack Obama set in motion a number of distinct and far reaching alterations to the business practices of the consumer debt industry which have only recently begun to take effect. Through this article we will take a look at some of the more substantial changes and how they could affect the average consumer.

1.) The so called double billing cycle that assessed interest rates upon accounts that had already been satisfied is now prohibited under federal law.

2.) In the past, credit card companies would attract new clients with a rock bottom introductory interest rate that would spiral upwards almost from the second a purchase was recorded. Under President Obama's new laws, all credit card debt and unsecured revolving debts will be forced to maintain the same interest rate for the initial year of membership so long as they did not advise borrowers about a rate hike in the contractual agreement and the borrowers are not over thirty days late with their minimum monthly payments.

3.) Even if the interest rate is contractually set to jump forward because of lapsed payments, the credit card companies are now still required to issue warnings at least forty five days in advance of the rate hike. Previously, the unsecured lenders were only forced to offer warnings fifteen days prior to normal upswings and none at all if the additional interest was found to be the fault of the borrower.

4.) Should the interest rate go up, it will not apply to the purchases already made under the former Annual Percentage Rate. In other words, balances accrued under a lower interest will not then be charged under the new rate.

5.) When issuing their monthly statements, the credit card companies must now comply with regulations that specify a clear and concise explanation of how long it will take to fully satisfy the existing balance through making the minimum monthly compensations as well as the monetary equivalent of interest charges paid along the way. The billing statements must also be mailed at least three weeks before the payment's due date a useful elaboration of the former statute which insisted only upon a vague reasonable time' in which the statements should appear.

6.) Since every credit card account whose interest rate has fluctuated will now feature balances assessed different finance charges as a matter of law, any money left over from the minimum monthly payment will automatically go towards paying down the portion of the unsecured debt with the highest interest rate. Left to their own devices, obviously, the credit card industry would prefer to let the funds instead tackle the lowest rates.

7.) From now on, if the regularly scheduled monthly minimum payment comes during a weekend or a national bank holiday, the following business day will still be acceptable for payments to be received without accounts being penalized. This was formerly one of the trickiest maneuvers that the credit card companies would employ to pad their coffers. Similarly, all payments received by five p.m. Eastern Standard Time on the final due date will be viewed as having been received on time.

8.) For credit cards issued to borrowers with less than sterling FICO scores, the lenders are no longer allowed to stack fee after fee upon the account balances. The recent regulations now demand that no more than one half of a borrower's account balance be comprised of fees or finance charge. Furthermore, only one quarter of the spending limit could initially be comprised of these fees.

http://www.articlesbase.com/personal-finance-articles/eight-changes-to-the-revolving-debt-industry-2766823.html

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