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By Renee D | Landlord in Worcester, MA

Get Out Of Debt - Caution! Credit Card Law Banks Refuse To Regulate Higher Rate

Get Out Of Debt - Caution! Credit Card Law Banks Refuse To Regulate Higher Rate

I want to help Americans be aware what I had  read in the Wall Street Journal recently where Jessica Silver-Greenberg journalist states, “some of the biggest card issuers in the U.S., including Citigroup Inc., J.P. Morgan Chase & Co. and Discover Financial Services, are already rolling out a slew of fees designed to recapture some of their lost income, in part by skirting the new rules. Some banks may even be violating the law outright, say consumer advocates.

"Credit Card companies are figuring out how to replace old fees with new ones," says Victor Stango, an associate economist with the Federal Reserve Bank of Chicago and a professor at the University of California, Davis, who has been analyzing how the Card Act will affect consumer banking. "It's a race between regulators writing ever-more-complex laws and credit-card companies setting up ever-more-complex fees."

Here we see that the creditors have been restricted in terms of their fees.  No more outrageous late fees.  In fact experts say most people will now pay a $25 late fee instead of the usual $39 AND there should be fewer of them.  Also, creditors must re-evaluate your profile every 6 months after imposing any kind of ‘punishment’ increase in interest rate.  What that means is that you have time to get back on track after you clean up your act and enjoy your original interest rate again.

There is a loophole, being that the Fed has refused to regulate the penalty rate on interest charges.  What did you say? Yes you did hear me correctly, if you don’t cure your late issue and pay on time for 6 months, you may wind up paying the higher rate forever.  This could easily double your monthly minimum payment, which leaves you stuck once again.  In addition to this, even though on paper creditors must re-evaluate your rates, what creditor on this planet is going to voluntarily reduce them?  Also, there is no requirement for creditors to share any re-evaluation details with you.  Here is a BIG opportunity for control that the regulators missed.  The results put people in a very poor position once again with their creditors and the awful cycle continues to spin.

There are some things that are positive however.  According to researchers, the number of credit cards that have imposed an ‘over the limit’ fee is down.  Down to less than 25%, a drop of over 80% for the same cards studied last July 2009.  In addition, arbitration language which was specifically present to limit a consumer’s right to fight creditors in court, is down 68% from last year.  Only 10% of cards now have this limiting legal language.  Consumers can now fight harder in court for disputed debt.

Credit card companies are losing BILLIONS due to the new rules.  Interest rates on new cards are expected to rise.  Teaser rates (0-3% interest rates) are also expected to decline. It’s a long climb to get out of debt.  Certainly just a week after new regulations went into effect is not enough time. Hopefully though the new laws will make it easier.  Or will they?

Call it what you like, but we feel creditors will still make it difficult for you to climb out of debt.  For some, this is impossible.  If that’s you, consider a good debt management program, debt settlement, or debt resolution.  They may be your only way out and will give you a fighting chance.  Debt resolution, a legal process, generates no taxes on resolved debt.  If you’re considering debt settlement or dealing with your creditors yourself, watch out for the taxes, they could put you right back where you started, except this time with Uncle Sam.


Renee Dumont is a distressed financial consultant - helping individuals who are looking for guidance on how to reach long term financial goals, which include debt settlement, credit repair and money management plans. Act Now!

CALL 888-877-9824 for a free consultation

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