It’s hard to keep track of all the recent legislation that has been passed within the last couple of months. Without sifting through the thousands of pages it is difficult to make sense of it all. Below is a brief summary of a few of these changes and how they can affect you. For more in depth information on these reforms please click on the link provided.
The CARD Act went into effect February 2010. Designed to protect consumers from unfair credit card and billing practices, this law has many new provisions around fees, interest rates, and marketing. Highlights include:
- Notifications and Billing Requirements-Credit card companies must now give 45 days notice to any changes to the terms of their cards. This includes interest rate increases and fees (annual or late payments).
- Monthly bills must be sent out at least 21 days before it is due and must have a consistent due date .
- Credit card companies can no longer increase your interest rate within the first 12 months of opening an account.
- Student Cards-People under the age of 21 will now need a co-signer or significant proof of income as evidence that they will be ably to make monthly payments. In addition, credit card companies can no longer market on or near college campuses.
The Good: We love rules designed to help protect us!
The Not-So-Good: Carefully review your credit card statements. Credit card companies are likely to increase other fees (balance transfers, annual, cash advance, and inactivity) in order to make up for lost revenue. It may also become increasingly difficult for young adults to build their credit history.
Reg E Opt-In (Overdraft Protection)
Going into effect August 2010, this Regulation includes provisions to eliminate consumer debit card overdraft fees. The rule applies to ATM debit card transactions as well as debit card store purchases. Financial institutions are now required to obtain permission from customers to opt into their overdraft protection programs. For customers who decline to do so, their purchase/withdrawal will simply be denied.
The Good: No more $35 fees for the $3 cup of coffee that led to an overdraft!
The Not-So-Good: Financial institutions will look for ways to increase revenues due to the $37 billion of fees related to overdraft payments last year they stand to lose. Some of the “rumors” I have been hearing include doing away with free checking accounts as well as a reduction in rewards programs.
Dodd-Frank Wall Street Reform and Consumer Protection Act (The Reform Bill)
Signed into law by President Obama on July 21, 2010, this law takes aim at the behavior of Wall Street and the Big Banks and it’s contribution to the financial crisis. The Bill establishes an independent consumer bureau within the Federal Reserve to protect borrowers against abuses in mortgage, credit card and other types of lending. In addition, it provides the Government with new powers to identify risky banking institutions and have the ability to seize big, failing companies. Furthermore, banks will now be forced to keep more capital on hand. The law has also permanently raised the standard maximum deposit insured amount to $250,000 from $100,000. Depositors now have the comfort of knowing that their money is completely safe as long as they are within the insured limits.
The Good: No more taxpayer bailouts!
The Not-So-Good: The Reform significantly limits the ability of banks to extend credit. Others argue that this will stifle the economy.
Hopefully this has shed some light on the new rules and how they can impact you. It is going to be interesting to see how all of this plays out.
If you have any thought or comments we would love to hear from you.