Credit Card Reform Redefines Penalty APRs
The Credit CARD Act is changing the way penalty rates – or rate hikes triggered by late payments – are applied. Beginning Feb. 22, if you are up to 60 days late on a payment, credit card companies can apply penalty rates on future transactions, but not on “any outstanding balance.”
Once you cross the 60-day threshold, however, things change and the card issuer can impose higher APRs on existing outstanding balances as well, after providing a “clear and conspicuous written statement of the reason for the increase.”
Additionally, issuers must notify cardholders that, provided the required minimum payments are received on time, the increase on the outstanding balance will terminate “not later than 6 months after the date on which it is imposed.” However, the penalty APRs can remain in place for “future transactions” following the imposition of the penalty APRs.
Chase, the top credit card issuer, informs cardholders that: “The penalty APR will be applicable indefinitely to future transactions of the type that occur more than 14 days after we provide you notice about the APR increase.”
(Via eCreditDaily.com)
February 2nd, 2010 at 7:02 am
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