According to many, the Credit Card Reform Act is the most significant reform work done by the Obama Government since rising to power at the beginning of this year. This Act is expected to save the consumers from getting ripped off by the credit card companies.

Given the economic situation, consumers are finding it hard to keep up with the whims of credit card companies, resulting in a significant rise in delinquency rate. Studies have shown that between July and September 2009 alone, the number of defaulted customers has risen by 11%. Hence, when the country was struggling under the overwhelming $ 963 billion credit card debt the reform was most welcome.

What does the Credit Card Reform Act promise?

• This Act is said to restrict the credit card companies and banks from changing interest rates at any time and for any reason, which is quite in contrast to what these companies can do now.
• This law would also restrict the companies from increasing the interest rate of the customers in the first year of the card. Also the companies can only alter the interest rate when the customer is 60 days late in payments or the rate change is stated in the contract.
• The new legislation requires banks to review accounts at every 6 months and has also mandated them to lower the interest rate of the customer who has been making timely payments during the period of the review.
• It has also mandated the banks to disclose how the interest is to be paid and how long it would take the customer to pay the debt off by making only the minimum payments.
• The new law has restricted the banks from charging over-the-limit-fees without receiving proper authorization from the customer.
• The law has also prohibited fees on over-the-phone or online bill payments.
• Under the Credit Card Reform Act customers below 21 years would now require parents or guardians as co-signer to get credit card.
• From now on banks would need to notify the customer 45 days (initially it was 15 days) before any change in interest rate.
• The billing statement should be mailed 21 days prior to the payment due date.

But, the Act has its limitations too

The new law has certainly promised more security to the credit card customers but like any other law it has loopholes, such as

• Though the new law has imposed restriction on the ability of the credit card companies to increase interest rate, they are still charging sky high for late payment and other such infractions and can charge as much as they want.
• The Reform Act has also not stopped companies from imposing new fees on the customer and as a result you may see inactivity charges, annual fees etc. attached to your card.
• Also the credit card companies have shown a trend of increasing the minimum payment limit on their cards. Many banks have raised minimum payment from 2% of the due amount to 5%.
• Customers are also experiencing sudden slash in their credit limits or finding their accounts closed without any intimation from the banks. The banks have been really jumpy and taking harsh measures like closing accounts even at the slightest opportunity.
• Banks are also getting tightfisted with rewards and points. Certain banks have severely cut back cash back offers and other privileges.
• The Credit Card Reform Act can be looked at as a significant step towards bringing down credit card delinquency rates. It’s expected to regularize the lending system and let customers get better control over their finances. We would need to be patient to see its effects on our lives. But for now we can definitely hope for the best.