No one can argue that credit card reform has brought many improvements for consumers; but there have also been some unintended negative consequences for clamping down on credit card companies' questionable policies and tactics. First, let's take a look at the good:
- Credit card consumers are no longer surprised by sudden changes to the terms of their contract. The new law ensures that credit card consumers are given 45 days notice of any significant changes to the terms of their credit card agreement.
- The abolition of arbitrary rate increases and universal default clauses. The new law prohibits credit card companies from increasing interest rates in a willy-nilly fashion, and the law has made the universal default penalty a thing of the pass. Universal default often was used when a consumer was late or defaulted on another credit card. With universal default, the creditor could then penalize the consumer by increasing their interest rates significantly.
- Over-the-limit fees are prohibited unless the debtor told the card issuer that they want to complete over-the-limit transactions.
And those are just some of the good changes that have helped consumers reduce their credit card costs. Now here's the bad:
- Higher interest rates. Many consumers have complained that since the new credit card law was put in place their interest rates have gone up. The truth is that many credit card companies tried to get around the law by hiking up interest rates before the law went into effect.
- Many credit card companies have introduced new penalties and fees to compensate for the loss revenue caused by the new law.
- The interest rates on cash advances have shot up significantly.
- Credit card companies are now issuing disclosures saying that their interest rate could go up for certain actions but they are failing to say how much the interest rate could increase. Once again this leaves another loophole for credit card companies to hit consumers with dramatic interest rate hikes.