Credit Card Late Penalty Laws Reformed

The credit card industry has recently been the focus of scrutiny by the government and many individual reporting agencies around the world due to the staggering amount of late fees that are charged to unknowing cardholders each year.

Billions of dollars are spent by Americans on credit card fees annually, especially late fees, which are the primary source of revenue for the credit card companies aside from the interest itself. In fact, more than half of all cardholders will incur a late fee sooner or later, and most of them will never see it coming. The main issue with the credit card fees is that they are often not entirely the fault of the cardholders, as many of these fees are incurred due to untimely payment processing on behalf of the credit card company. Fortunately, laws were recently passed that change the way credit card companies issue late fees.

Longer Grace Period

On August 20th, 2010 one of the most substantial regulatory changes in the credit card industry in two decades occurred as laws were passed in favor of consumers to lessen the ever-increasing amount of credit card debt in America. One of these laws states that all credit card companies have to allow their cardholders at least 21 days to pay their monthly bills, and before any fees or penalties can be charged a 45-day warning must be issued. Before the laws were passed, credit card companies only had to allow cardholders 14 days to pay their balance and 15 days warning before charging fees and penalties. The new longer grace periods give cardholders the chance to recover and repay their debts before additional fees are charged and even more debt accumulates.

Objection of Terms

There is also a clause within the new law that allows every cardholder to object to the terms of their new card conditions. If the dispute is filed 45 days in advance, the cardholder may even be allowed to close the credit account and dissolve the debt. This law helps prevent consumers from being trapped in credit agreements that they don’t feel is fair. Before the laws were passed, cardholders had no choice but to pay any fees and charges incurred with their new card, regardless of how unfair the terms may have been.

Laws for the Near Future

Aside from the aforementioned law passed on August 20th, there are also laws expected to be implemented in February of 2011. These new laws will greatly restrict the ability of all financial institutions to impose unexpected fees or raise interest rates. Other new laws are expected to eliminate the sale of student credit cards, which are expected to have a positive impact on the economy and may eliminate a large percentage of the debt that is incurred each year by new cardholders.