New Laws Affecting the Credit Card Industry

On May 22, President Obama officially signed the CARD Act and the new regulations will take effect in February 2010. This set of laws is a major milestone for the credit card industry and may be instrumental in ending deceptive practices that affect consumers.

How may this affect the credit card industry?

The Motley Fool, a financial education site, indicates that credit card issuers may cut back on certain benefits in order to recoup lost revenue from these new laws. For example, grace periods and cards without annual fees could become obsolete. Credit card perks and reward programs could also be eliminated. As many consumers have also experienced, creditors may continue to lower credit lines to reduce risk. It may also become more difficult for applicants to obtain credit, especially those with weak credit histories.

Credit Card Stats:

A recent study of the 12 major credit card issuers determined that all had one or more rules that would now violate the CARD Act. Below are some findings:

93% of issuers could raise the interest rate at any time

72% of cards included offers of low promotional rates which issuers could revoke

The median penalty rate of 27.99% would add charges of $100 and $180 annually for every $1,000 in revolving purchasing debt

Consumers that are in the process of saving for a debt settlement, should take note of the new laws taking effect.