A new federal law the Credit Card Reform Act restricting the ability of credit card companies to change rates and terms on your card will take effect on February 22, 2010. Unfortunately, banks have been very busy changing what they can charge before the effective date of the law (GE Money for example raised their regular rate to prime plus 19%!). Congressman Barney Frank and others have said that perhaps some provisions of the law should be retroactive to prevent a last minute increase in interest rates, however, it does appear likely. Although the banks claim there is no connection between their recent rate increases and the new law, it is hard not be skeptical.
The credit card banks fought the bill and got it watered down somewhat, so it’s clear where they stand. They claimed it will make getting credit more difficult and restrict their willingness to issue credit cards. Our question is - why should these restrictions on changing rates and terms have any effect on a persons creditworthiness.
In any event, hold onto your hat. The higher rates that are coming before the law changes will probably drive more cards into default, and more people will be looking for a way to get out from under the credit burden. At DNS we will watch the trend of defaults closely over the next few months and keep you up to date on what we discover.
Richard Savrann, Legal Counsel
Debt Negotiation Services
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