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7 February 2014
 February 7, 2014

When the Obama administration announced the signing of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, the new law was supposed to be “a turning point for American consumers and [end of] the days of unfair rate hikes and hidden fees.” Two years later, a more detailed inspection of the language in the act reveal the rules for credit card companies are not nearly as transparent as consumers would think.

Consumers preparing for the holiday season may want to pause before reaching for their credit cards. Two loopholes could put a crimp in their holiday budget.

The first discrepancy deals with hikes in credit card interest rates. Credit card companies have a right to increase an interest rate provided they give the cardholder 45 days notice of the change. Cardholders who receive notices of rate hikes might read their notices and think their interest rates would not jump until after that time had elapsed.

Here’s the ugly truth. Don’t count on it. As the official Department of the Treasury answer explains, a card holder actually only has 14 days until the new rate kicks in, not 45 days as the notice implies. The card company gives a customer two weeks to decide whether or not to accept the changes, but then can raise the rate on the card. The company, however, does have to wait until 45 days are up before it can reflect the changes on the customer’s bill.

Here is a real-world example:

September 1st: Cardholder John Doe receives a notice from his credit card company that his rate will increase from 9 percent to 13 percent, to be reflected in his bill after 45 days.

September 15th: John’s new rate kicks in today. Any purchases made between the first and the fifteenth were at the previous 9 percent rate. Any purchases made after this date will be subject to the 13 percent rate.

October 17th: John will receive a bill that reflects the rate hike that occurred on September 15th.

The second discrepancy applies to those individuals who are behind on payments. For them the news gets worse. Credit card companies can retroactively raise the interest rates for anyone who happens to be more than 60 days behind on paying their credit card bill. The new rate does not just apply to the charges made during their delinquency. It applies to the entire outstanding balance, regardless of when the purchases were made. The delinquent cardholder has 14 days to decide whether they wish to pay the bill or close the account, and after 45 days will receive a new bill that reflects the new rate.

Knowing about the problems with the CARD Act may help some consumers stay out of harm’s way. But for families already juggling credit card debt, these loopholes are likely to hit them hard when they’re already feeling down.

If you have been struggling to stay afloat by using one card to pay another, it may be time to explore other solutions. An experienced Chicago bankruptcy attorney can review your situation and discuss your options with you.

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