(NECN: Peter Howe, Boston) Biggest change in decades -- and still doesn't go far enough. Those are the main reactions as new federal credit card rules months in the making finally took effect Monday.
Some of worst tricks of card issuers designed to make you pay more are now illegal. But there are still no limits on what interest and what fees they can charge, as long as they meet disclosure requirements.
Massachusetts Attorney General Martha Coakley said while it isn't perfect, "This is an important protection for consumers.''
"For people who have credit cards, now companies cannot change their interest rate in less than 45 days under the current law. Before today,'' Coakley said in an NECN interview Monday, "it was 15. So it meant, with the bill, the company could alert you that by the next time you're paying the bill, 'Hey, your interest rate's going to go up.' It didn't give consumers much time to respond or change companies or try to pay that bill off.''
That change in notification before rates change is just one of many changes taking effect this week with the new Credit Card Accountability and Responsibility Act. Many of them are about forcing more disclosure, and earlier.
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For example, now when you get a new credit card, there can't be any interest rate changes in the first 12 months. Promotional rates must last at least 6 months and the rate the following 6 months be clearly disclosed. The law makes it impossible for you to make charges over your set credit limit -- and rack up the added fees those inflict -- unless you've previously approved them with the card issuer. And on new cards, the annual and application fees can't exceed 25 percent of the dollar value of the credit limit you're getting.
One of the biggest changes: If you get behind on your minimum payments, after 60 days, the card issuer can raise your interest rate -- but if you then make your minimum payments for six months continuously, the company must return your interest on the prior balance to the old, lower rate.
Susan Powers, a financial expert with Armstrong Advisory Group in Needham, Mass., says, "The most important changes are going to be those that impact your interest rates and what you're going to be paying to the credit card companies. They can no longer arbitrarily raise your interest rate now.''
But her biggest disappointment with the bill is that hasn't stopped credit card issuers from just coming up with new replacement fees -- or charging interest rates as high as 29 percent and 30 percent. "I wish we saw a cap on the amount of fees that credit cards can charge. Their late fees, they can [still] determine what they're going to charge on that.''
Attorney General Coakley agrees. "Perhaps Washington should look at capping rates. I mean, we do that at the state level for certain lending activities and pawn shops.'' Coakley says and other state attorneys general also wish they had authority to investigate and regulate credit card terms and practices, all of which are subject only to federal regulation. And Coakley notes, "For people who are stuck now with a high balance and a very high interest rate these new rules don't provide a lot of relief.''
It's widely estimated that card issuers will lose $50 billion in revenues over the next five years because of these changes -- and without a doubt, credit card issuers will be trying to come up with new practices and fees and higher interest rates to recoup that.