Credit Card Debt - Good Credit Doesn’t Count in 2009 - You Are at Risk!
Ξ February 28th, 2009 | → 0 Comments | ∇ Credit help |
Unless you pay off your credit card balances every month, you are at high risk now of having your credit terms changed with little or no warning. In Summer 2010 new regulations will go into affect that will stop predatory lenders from preying on customers.
Lenders will no longer be allowed to arbitrarily raise interest rates on balances but will only be able to raise rates on new charges or in the case of late payments.
They will no longer be allowed “cross default” where they raise interest rates due to a late or missed payment to another lender on a different account.
Currently, credit card companies must give only 15 days notice of a change on your account and these notices are often written in legalese in very small print and many consumers don’t realize a change is coming. After the new regulations take affect lenders must provide more time between the notice and changes made to an account. Notices will have to have a clear and visible statement of upcoming changes (as opposed to the current practice of hiding the change somewhere in the small print).
An increasing complaint in the past couple of year has been a new practice of changing the payment due date each month. Consumers have complained that the date is one or two days earlier than on the previous billing - and this sneaky practice will not be allowed under the new law.
Most of us listen to stories of credit card problems with some cynicism. We’ve been programmed to assume that the customer is the reason for any problems. After all, only those who don’t pay their bills on time have interest rates raised - don’t they?
No - not any more. The new laws were approved in December 2008 but the pressure applied by lenders and their lobbyists resulted in “business as usual” for lenders until summer 2010. Why is this important? Very simply, it gives these companies 18 months to change credit accounts to their benefit. The “tricks” are going to stop - but not until companies like Citibank and Chase have sufficient time to make any and all changes they want. Are you beginning to see the danger here?
You ARE at risk. Your good credit provides no protection. Those with bad or slow credit have already seen their interest rates rise as high as 36% and their credit limits decreased. Bankruptcies have increased as consumers have found themselves unable to meet minimum payments that have tripled. The changes are accelerating and credit card users who have never paid late, always paid far more than the minimum due and have excellent credit ratings are finding their account limits lowered substantially without warning and their interest rates raised to 30% or higher for no reason.
The Credit Bureaus seem to be enabling this re-alignment. Experian recently stopped providing the three digit credit score to customers. How can you judge the strength of your own personal credit if you are not allowed to know that magic number that is being used to rate you?
I’ve warned about this account realignment since learning of the delay in enforcing the new regulations on lenders. The problem has become much more serious than I expected and it is estimated that so far 30% of credit card users have seen changes in the terms, limits or interest rates on the balances they carry from month to month.
One example is a friend who was notified recently that his 9.9% interest rate on a card he has used for almost ten years had been changed to 32%. This person has a FICO score of 780, a good income and great payment record. This is the type of customer credit lenders have courted for years. When he called thinking there was an error, he was bluntly told that his lender was “realigning” their accounts in preparation for new regulations.
You cannot afford to ignore this unless you have the funds to pay off your accounts in full if terms change. Good credit will not protect you from these predatory practices. For the next 18 months all credit card holders who carry balances on those accounts are at high risk. It’s critical to monitor all of your accounts carefully and read thoroughly any mail received from credit card companies. If you do not have the time to personally watch these accounts, consider using one of the monitoring services to alert you to any changes being made.