New Credit Card Rules: End to 'Abusive Practices'?

New protections arrive today for Americans suffering under the weight of rising credit card debt and frustrated by unforeseen fees and limits.

"Starting Monday, credit card customers will see an end to many abusive practices that have driven Americans into debt," Sen. Chris Dodd, chairman of the Senate Banking Committee, said in a statement. "Customers need to act responsibly. In turn, they deserve to be treated fairly."

Congress passed the sweeping new rules, which come after years of complaints, in May of 2009. Credit card companies will no longer be able to hit consumers with a fee for exceeding their limit unless the consumer has agreed. The companies cannot shift due dates for consumers, which can result in late payments.

Also, the companies can no longer target young consumers with aggressive solicitations. And the companies cannot ratchet up interest rates unless they give 45 days' notice. If they do raise rates, they must reduce the rates if a consumer pays on time for six months.

"With today's implementation of new rules, we are taking a critical step forward in our effort to protect American families by prohibiting the use of unfair retroactive rate hikes and late fee and over-limit fee traps by credit card companies," Treasury Secretary Tim Geithner said.

"Thanks to the leadership of President Obama, who signed the Credit Card Accountability, Responsibility and Disclosure Act into law last spring, families will finally have clear, fair rules of the road that will help them understand what they are getting into when they sign up for a card and how much they pay to use it."

Credit Card Interest Rates Rise

For some consumer advocates, the new rules come not a moment too soon, after credit card holders have seen large interest rate increases in recent months.

"After months of jacking up interest rates on money consumers already borrowed, the party is over for credit card companies," Consumers Union policy counsel Pam Banks said. "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. Consumers still need to be on the lookout for unfair practices but this is a big step forward."

Increases in interest rates and minimum monthly payments are a number of the ways in which credit card companies may attempt to go after consumers' pocketbooks, consumer advocates say.

Chi Chi Wu of the National Consumer Law Center said, "The companies have figured out a whole different set of tactics to keep gouging consumers."

Banks said such practices may include no limits on the size of penalty interest rates, interest rate hikes on future purchases, sharp increases to minimum payments and no restrictions on the kinds of fees that companies can charge, such as those for paper statements.

To guide consumers through the new rules, the Federal Reserve Friday started a new interactive Web site -- www.federalreserve.gov/creditcard -- that summarizes the new protections.

"These online tools and resources will help consumers make well-informed decisions about their use of credit," Fed governor Elizabeth Duke said in a statement. "We will update the site regularly to provide the most useful and current information."

A recent study by the Pew Safe Credit Cards Project found that today's new rules will lead to tens of billions of dollars in savings for consumers.

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