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Yesterday, Phase Two of the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) came into effect. This should theoretically be putting the brakes on some bad behavior by credit card companies.
Said President Barack Obama: "[T]oday, we are shifting the balance of power back to the consumer and we are holding the credit card companies accountable."
Indeed, major credit card companies have engaged in what many would argue are unfair and deceptive practices for years. But the relentless lobbies of the major credit card companies and the banks have helped these companies evade legislative reform for decades.
Now, the tide of credit card reform may have shifted.
For a breakdown of the provisions which took effect last August, including the requirement to give customers advance notice of significant changes in the terms of their accounts, see our previous post about phase one of the implementation of the CARD Act.
The changes that went into effect yesterday include:
Although these credit card changes signal relief for credit card holders, legislative news isn't always so one-sided. The new rate limitations, for example, will lead credit card companies scrambling to recuperate the lost income by circumventing the restrictions and becoming more aggressive in areas where they have some breathing space. Furthermore, the limitation in fees could just mean more aggressive tactics in figuring out new fees which escape the legislative limitations.
The effect on the consumer credit industry has yet to be seen in the wake of this new legislation. It will be interesting to see how major credit card companies respond to the CARD Act's credit card reform, and to see if the new law deters the unfair and deceptive practices many feel have long pervaded the industry.
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