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The Credit Card Bailout Myth Busted

Indrajit Deshmukh Jun 6, 2019
When analysts talk about credit card bailout, they may be referring to the Credit Card Accountability Responsibility and Disclosure Act of 2009, which implemented some much-needed reforms in the industry.
The recent economic crisis highlighted many discrepancies in the way credit card companies conducted their business. Statistics have revealed that more than 60 percent of families in United States had credit card debt and a large number of them were struggling to make ends meet.
Realizing this, the administration decided to make some amends to the way these companies did business and they devised a new law. There are some myths surrounding the Credit Card Accountability Responsibility and Disclosure Act of 2009.
One of them is that the government will pay your credit card debt or your debt will be forgiven. Nothing could be further from the truth. The act has changed the way credit card companies functioned, but it does not pay or forgive credit card debt.

Busting the Bailout Myth

The Credit Card Accountability Responsibility and Disclosure Act of 2009, also known as the credit card reforms act of 2009 has been widely misinterpreted as a bailout program, which it is not. Here are some of the reforms made to the credit card industry, which are aimed at curtailing spiraling debts.
  • Credit Card Companies, under the new act, cannot arbitrarily change the rate of interest. Now they have to give at least a 45 days notice to the customers. The customer also has 3 billing cycles to decline the new rates, without incurring any penalties.
  • Companies have to send the credit statements to the customers, 21 days in advance, so that they have enough time to respond (earlier this time limit was just 14 days). The companies were also required to consider payments made before 1700 EST on the due date, as on-time payments.
  • Under this act, companies are required to have transparent deals. They will have to make their contact details like customer service phone numbers and email IDs readily available.
  • The reforms also restrict the companies from using ambiguous terms like 'Prime Rate' and 'Fixed Rate'. Card companies cannot charge late payment fees, if the customer has a proof of payment sent at least 7 days before the due date.
  • The reforms also restrict companies from charging exorbitant 'Over the Limit' fees. The new act also intends to prevent double cycle billing, wherein companies charged interest on debt that was paid on time.
  • Reforms made in payment allocation bind the companies to adjust payments made by customers against transactions with high interest rates; for example, cash advances. Under the new act, customers can set their own 'limit' and have a fixed credit limit. This will put curbs on charges levied on crossing the credit limit.
  • To protect the vulnerable population, the new reforms prohibit companies from selling cards to people under the age of 21. They can only do this, if the said person has a cosigner who is over 21. Companies are also prohibited from charging any fees from customers for not using the card.
All these provisions were collectively implemented by the act. If you are having trouble with your credit card debt, it is advisable to contact consumer credit counseling services. Try and contact one which is part of the National Foundation for Credit Counseling (NFCC) or Association of Independent Consumer Credit Counseling Agencies (AICCCA).