Loophole in credit card protection bill forces consumers to pay

LOUISVILLE, KY (WAVE) - The new Credit Card Accountability, Responsibility and Disclosure Act, signed into law back in May, is designed to protect consumers from unfair jumps in interest rates and credit card fees.

"It's really to protect consumers and avoid abusive practices by credit card companies," said Mary Jackey, community outreach director with Consumer Credit Counseling Service of Greater Louisville.

However, the act does not kick in until February 2010, leaving rates and fees hikes fair game until then. "We've seen creditors increasing minimum payments going from 2%, maybe be a minimum payment going as high as 4% or 5%, which is in this economy is really tough for most people. It almost doubles their minimum payment," said Jackey.

Beginning in February, creditors cannot arbitrarily increase rates. In fact, cardholders will have to be given 45 days notice of a rate, fee or finance charge hike. Until then, increases are unrestricted.

"We've had a lot of clients come in and tell us they tried contacting the creditors before they came to us and a lot of the creditors said I'm sorry there is nothing we can do," said Jackey.

Jackey says if you do reach out to your creditors, a move counselors usually recommend, be extra careful. "Because we what we're seeing right now is those credit card companies would much rather keep that client then lose them to a bankruptcy. What we're seeing is that they are offering debt settlement a lot more frequently then they had in the past."

Jackey also says watch out for balance transfer promotions with interest rates that usually shoot up after several months or leave you able to transfer only some of your balance onto a new card. "They may end up with a new additional line of credit in addition to the old line of credit and it dings their credit score cause then they have a credit inquiry on their report and that can drop their credit scoring quite a bit."

According to Jackey, your best bet right now is to very carefully go over your monthly credit card statements and look at your fees and interest rates. If you see a spike and are concerned about meeting the new payments, contact a credit counselor. It is a free service and could make all the difference in your financial well-being.

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