With the CARD act coming into play, credit card lenders do not have the liberty of increasing the annual percentage rate on the credit cards arbitrarily. They have to mandatorily give customers a 45 day notice to intimate them about the forthcoming changes so they can either be prepared for it or close the card if they are not willing to accept it.
Another stipulation of the act says that the lenders cannot increase the rates without any rhyme or reason. They can increase the interest rates only if the customers have not been making their payments on time or have defaulted many times in the past. Even when the banks do increase the rates in such cases, it has to be only on the fresh expenditure made using the card and not on the existing balance. It is also imperative for credit card issuers to review customers accounts once every six months and reduce the rate of interest if they have been paying their dues consistently on time. Also, if you have multiple cards with the same lender, banks cannot increase the rate of interest on both cards if you have defaulted only on one. Another important stipulation of the CARD Act is that customers cannot be charged an over-the-limit fee if they have not opted for the overdraft facility.
Despite all these changes brought about by the CARD Act, there are a few loopholes that the banks are still exploiting to their benefit because of which this act seems ineffective. This act does not prohibit the lenders from closing the credit card accounts or reducing the credit limit without informing the customer in advance. Also, this act only offers protection for consumer cards and not for small business credit cards.
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