The credit card legislation signed by President Barack Obama in May provides consumers their first morsel of relief when card issuers must begin giving more notice before imposing rate increases or charging late fees.
Beginning today, the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 increases the required notice before raising credit card interest rates to 45 days from 15 days.
The new law offers cardholders another perk: A consumer can now decline a rate increase by closing the account and agreeing to pay off the balance at the current rate within five years.
"So (consumers) can effectively convert their balance into a closed-end loan that they can pay down over five years. That's a tool that they didn't have up until now," said Eleni Constantine, the director of the Pew Charitable Trusts Financial Security Portfolio.
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"Now if you don't like your rate, you can close your card, but the rate is already in effect without getting any notice and it applies to your existing balance. This gives people a little more leverage to say, 'No, I'm going to go shop around for another card.' "
Cardholders who rack up late fees also will get a break under the new law on Thursday. The legislation requires that monthly billing statements be mailed or delivered at least 21 days before the due date to charge a late fee. The fees can now be applied after only 14 days notice.
These first provisions aren't the bill's strongest or most important. Most of those measures, such as requiring adult co-signers for card applicants under age 21 and banning retroactive rate increases, won't take effect until February. Other provisions will take effect next summer.
In the meantime, credit card companies are trying to increase profits to offset presumed revenue declines that the new rules will likely cause, said Bill Hardekopf, the chief executive of LowCards.com, a consumer Web site that monitors the card industry.
Specifically, card issuers are increasing interest rates; introducing more cards with annual fees; raising other fees, such as balance-transfer fees; moving from fixed-rate to variable-rate cards and cutting rewards and bonus offerings, Hardekopf said.
He and other consumer advocates wonder why Congress gave the card industry so much time before the laws took effect.
"If credit card issuers need to make a change to increase the (annual percentage rate) or increase a fee, or anything that benefits them, they can do that very, very quickly, so I don't know why the government gave them so much time to make those changes," Hardekopf said.