Tierney heralds credit card reform as law takes effect

PEABODY – The reform Credit Card Accountability, Responsibility and Disclosure Act went into effect Monday, signaling a nationwide change in the way credit card companies must notify customers of interest rate shifts, fees, policy amendments and accounting procedures.President Barack Obama signed the bill into law last May, a move heralded as a turning point for American consumers. The law did not, however, establish clear interest rate caps for credit card companies, a provision sought by U.S. Rep. John F. Tierney, D-Salem. Instead, it includes language to prevent credit card companies from unfairly hiking interest rates with little or no notice.Months before the signing, Tierney urged his congressional colleagues to take a harder stance by capping credit card interest at 16 percent. Instead, the final version of the compromise bill addressed only the most egregious usury practices.”For too long, credit card companies have had free reign to employ deceptive, unfair tactics that hit responsible consumers with unreasonable costs. But today, we are shifting the balance of power back to the consumer and we are holding the credit card companies accountable,” Obama said Monday in a prepared White House statement.Credit card companies can no longer retroactively increase rates or increase rates in the first year you open an account, charge misleading late fees or use over-limit fee traps, he said, adding, “They’re now required to send ample notification if they plan to make changes to the terms of your card and they must employ clear, simple standard payment dates and times.”According to Obama, every year, Americans pay approximately $15 billion in credit card penalty fees. Since nearly 80 percent of American families have a credit card, and 44 percent of those families carry a balance, a consumer protection law was needed, he said.The law also includes new protections for underage consumers, restrictions on double billing and caps on high-fee cards.”From the start we said that if you pass all these other improvements without capping the interest rates, the companies will raise their rates before the law goes into effect, and that’s exactly what they did. So now there are some cards up there with 30 percent interest, held by people who have good credit and don’t miss payments,” Tierney said.Tierney said credit companies must now provide 45 days notice to customers of any rate increase or change in terms. “That’s 45 days more than we had before,” he said.”And there must be no less than 21 days between when the company sends its statement and when the bill is due. That will help avoid late fees.”The new law also prohibits companies from raising interest rates on existing balances, or imposing penalties through rate increases on bills that are less than 60 days overdue.Credit card companies can no longer issue accounts for those under age 21 unless co-signed by an adult, and promotional rates must last for at least six months.”The new rules are an unprecedented step in my administration’s ongoing efforts to strengthen consumer protections and enact meaningful financial reform,” Obama said. “These new rules don’t absolve consumers of their obligation to pay their bills, but they finally level the playing field so that every family and small business using a credit card has the information they need to make responsible financial decisions.”During his attempt to cap interest rates through his proposed Restoring America’s Commitment to Consumers Act, Tierney warned that credit card companies would seek to make up revenue losses from reform legislation by raising rates. That has since occurred.”For years, but particularly during these challenging economic times, Americans of all ages – from college students to senior citizens – have been forced to take on credit card debt to pay their bills and make ends meet,” the congressman said.Tierney said laws limiting usurious behavior have been in place since the Babylonian Empire and were present i