The financial help from the government’s side with respect to credit card debts has been noteworthy. Read the following article that highlights some of the steps implemented under this initiative.
The recent economic recession has left a large number of the US population with credit card debts due to lack of jobs and sliding wages. The Obama government to alleviate this issue introduced an economic stimulus package as a part of this initiative. Under the American Recovery and Reinvestment Act of 2009 (ARRA), the government has promised USD 787 billion to revitalize the economy. The funds are aimed at creating new jobs, grants for business, and tax credits to enable the population take home larger paychecks.
Realizing the need to make changes in the way credit card companies did business, the government initiated the Credit Card Accountability Responsibility and Disclosure Act of 2009, also known as the Credit Card Reform Act of 2009. The administration put restriction on the card companies from arbitrarily changing the terms of contract. It also put restrictions on the companies from changing the rate of interest without informing the consumers well in advance.
The amount, USD 787 billion, allocated by the Obama administration to help the American population deal with the economic recession is one of the biggest government spendings for debt relief. Out of the total amount promised over a period of 10 years, more than 60 percent of it is scheduled to be released in the first three years. The amount will be disbursed in the form of government grants, contracts, business loans, tax benefits, and entitlements.
Around USD 288 billion will be pumped in to the US economy in the form of tax benefits for individuals and organizations. Several changes in the federal tax tables will enable eligible individuals in making work pay tax credit. Individuals will benefit from larger paychecks because of these tax reforms and can get a maximum of USD 400 and USD 800 for married couples.
One of the reasons the population is not able to get out of this debt is that most of them have either lost their jobs or are working for lower wages. To help better this situation, the administration is pumping in USD 275 billion, in the form of government contracts, grants, and loans. The money will help create new employment opportunities and help people retain their existing jobs. It also has provisions for education grants for low-income families and businesses’ loans.
Another USD 224 billion of government spending will go towards entitlements like unemployment benefits and health care. A part of the amount will also go towards unemployment insurance to help people from low-income families.
To help the population with their mounting debt, the government enacted the credit card relief act, which made sweeping changes to the ways card companies conducted their businesses. One of the major things that the act intends to do is get greater transparency in credit norms and contracts. Card companies must have the credit contracts online for government scrutiny. The government has also stipulated the size of the font to be used for the contract.
This federal government relief program also makes it mandatory for card companies to send the credit card statements 21 days in advance before the due date. Companies have also been restricted from using previous months’ balance to calculate the current month’s dues; a common practice known as “double cycle billing.”
The act also prohibits card companies from changing the interest rates without notifying the consumers at least 45 days in advance. The consumers also have the right to cancel their credit cards if they wish so, and they have 3 billing cycles to do so. Being a clause to protect the vulnerable population, credit card companies cannot give cards to anyone who is below 21 years of age, unless he has a cosigner.
As part of this government initiative, the new act also puts limitations on the “over the limit” fees that card companies charge. It also states that creditors apply card payment to highest interest rate transactions first, like cash withdrawals. Cardholders also have the right to reject a card they have been pre-approved for, without denting their credit.
This help from government comes in the form of reforms to the credit card industry and the stimulus package to revive the US economy. If you are struggling with such debts, it is also advisable to contact consumer credit counseling services. Agencies that are a part of the Association of Independent Consumer Credit Counseling Agencies (AICCCA) are typically one of the best options.