Part of a new credit card legislation, signed in May by President Obama, goes into effect today (reports USA Today). Credit card companies must now give consumers 45 days notice before any significant changes to their accounts. Also, they can no longer label a payment as late, unless the credit card bill was sent at least 21 days before its due date.
But what is a significant change?
Unfortunately there are some holes that need to be plugged. Under this new legislation, account closures and credit line decreases do not qualify as “significant changes”. I think most people would agree that both of those changes would be quite significant, and should fall under the” 45 day notice of major changes” category.
This still leaves the door open for consumers to receive sudden cuts in their credit line, which raises their “credit utilization ratio” and can be very damaging to their credit score. This could cause the consumer to appear to be a higher risk borrower, which could lead to higher interest rates or possibly credit or loan applications being denied.
Still providing advantages
While this new legislation has some holes, it still provides some protection for consumers which did not exist before. Among other things, it will give consumers more time to pay their bill, without receiving a late fee. That’s a big plus.
The most significant pieces of the legislation don’t take effect until Feb. 2010. So look out for those. In the mean time, enjoy the extra time to pay your credit card bills!