By allowing ads to appear on this site, you support the local businesses who, in turn, support great local journalism.
Law takes swipe at credit card rules
Federal legislation to help consumers
credit cards
New legislation beginning in February is aimed at helping credit card holders avoid fine-print fees. - photo by For the Forsyth County News
By the time most people contact the Consumer Credit Counseling Service of Greater Atlanta, they owe an average of $23,000 to various credit card companies.

Spokesman John McCosh said the nonprofit credit assistance organization will have fielded about 1.5 million phone calls nationwide by year’s end.

“A good number of people who have come to us in the past year have been over the edge by the interest rate on their credit card rising because of one late payment,” he said.

“They were able to make the minimum payments when their interest rates were on the lower end of the scale, but when they get bumped up into the high 20s, which is frequently ... they are unable to [pay].”

The surge in credit card debt over the past few years was the reason behind the Credit Card Accountability, Responsibility and Disclosure Act, or CARD.

The federal bill, which becomes law Feb. 22, is geared toward helping cardholders avoid fine-print fees and rate increases.

Forsyth County’s congressional delegation supported the bill, which President Barack Obama signed in May.

The legislation, U.S. Sen. Johnny Isakson said, will “help insure that Georgians are protected from the unscrupulous actions of credit card companies by establishing fair and transparent practices regarding consumer credit.”

“It’s only right that these companies notify consumers of any significant change in terms regarding their credit cards and put contract terms in language that consumers can see and understand,” he said.

After Feb. 22, credit card companies must get a cardholder’s permission to process a transaction that would put them over their credit limit.

Companies must give 45 days notice before changing terms and conditions of an agreement.  

In addition, payment due dates must always fall on the same date each month and be at least 21 days from the time the bill is mailed.

For those opting to pay more than the minimum amount, any additional money will be applied to the balance with the highest interest rate.

There is also a provision to prevent card companies from signing up anyone younger than 21 for a card without parental permission or a verifiable annual income.

Of the people calling the consumer counseling organization, about 650,000 received some form of counseling, up from about 100,000 in 2007.
Nearly 26,000 cardholders are enrolled in the organization’s debt management plan.

“In those plans, we’re able to negotiate a much better rate with creditors in the 6 to 10 percent range,” McCosh said.

On average, the plan helps cardholders get out of debt in about four to five years.

While the new law will not wipe away debt, McCosh said, “Theoretically, we should have fewer people calling us.”

“The law makes it harder for creditors to raise the interest rates without providing clear warning to the borrower that this is about to happen,” he said.

“Some people say that access to credit is going to be more restrictive. But I think that’s going to be hard to tell because we’ve had people having trouble getting credit a year ago, before this bill was even being discussed.”

Scott DeBoard said the changes could help. In his line of work, however, the goal is to avoid plastic altogether.

As a counselor for the Dave Ramsey Financial Peace University at Cumming First Baptist Church, DeBoard practices and preaches a debt-free lifestyle.

The 26-week program is geared to those between $5,000 and $10,00 in credit debt.

“We bank on the fact that credit card companies prey on human behavior, and that human behavior is why people get into these scenarios,” he said. “We teach people how to get to where they’re completely cash-dependent.”

For many who are seeking credit, including small business owners, McCosh said it’s been more difficult to come by given the tightened belts on the credit industry. It’s also why many have had trouble getting out of debt.

In the past, he said, people would take out a home equity loan, or find other ways to manage expenses. But today those tools aren’t as readily available.

The law means companies won’t blindside cardholders with surprise fees. But one way or another, McCosh said, card companies are “going to figure out a way to stay in business and keep making money.”

“I’ve already heard of some fees being added to credit cards that didn’t use to charge an annual fee,” he said. “The banks and lenders took a big hit in the economic crisis too.

“The banks are trying to make money too. They’re going to try to find a way to continue to be profitable.”