NY Daily News: New law protecting credit card users goes into effect

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http://www.nydailynews.com/money/2010/02/23/2010-02-23_new_law_protecting_credit_card_users_goes_into_effect.html

Banks can no longer jack up interest rates on most customers' credit card balances, as a federal law protecting millions of consumers took effect Monday.

"Today is a great day for anyone who has a credit card in their wallet," Rep. Carolyn Maloney (D-Manhattan), an author of the legislation, told reporters.

"The rules . . . end predatory lending practices of credit card companies that seem to have lost all sense of decency in favor of greed and profits at any cost," added Sen. Robert Menendez (D-N.J.), who also helped draft the law.

The legislation, which President Obama signed last spring, is intended to help consumers understand how much their credit cards cost to use.

In the past, credit card companies were largely permitted to hike interest rates at their discretion, even if cardholder payments were current.

"For too long, credit card companies have gouged consumers with deceptive and unfair interest rate charges and fees," said Chuck Bell of the Consumers Union.

"These new rules will put an end to some of the most abusive credit card lending practices that have trapped millions of Americans in debt, and made it harder for them to make ends meet," Bell said.

Retroactive rate hikes and late-payment penalties cost U.S. consumers at least $10 billion per year, according to a study by the Pew Charitable Trusts.

The new regulations have limitations, consumer advocates warned. "This law is a first step," said Therese Revesz of Citizen Action of New York.

Banks are still allowed to hike rates on the existing balances of customers who make payments more than 60 days late - and raise rates for future purchases with 45 days' notice.

Also, card issuers can impose whatever fees they want, and can raise monthly minimums sharply. Some fear there will be a host of new or higher fees in order to make up for lost revenue.

As card issuers have tried to cut exposure to various risks, the number of Visa, MasterCard and American Express cards in circulation dropped 15% in 2009, according to the Associated Press.

Revesz hopes Congress will pass pending legislation to create a Consumer Financial Protection Agency, which would police the credit card companies.

lcroghan@nydailynews.com