Tis the season … when we are all spending money on the holidays - gifts, entertaining, travel, perhaps year-end charitable donations, etc. And when the outflow is going faster that the inflow, we have what businesses call a "liquidity crunch". I don't know what all of you do when you are being crunched like that, but I will take advantage of the credit card offers that fill my mailbox - the ones with the promotional teaser rates - 0% through August, 2010; 1.99% through 12-31-10. Yes, I have learned to read the fine print - and have noticed the "transaction fee" has climbed in recent years from a minimum dollar amount to between 2-4% per transaction. But paying even 4% for the money for a year is better than paying whatever the "regular rate" is. Right?
Well, with online payments, with direct payments from banks, with paperless bills, there are times when I have simply lost track of my due date, and have not paid the minimum payment on time. And of course part of the fine print in the original teaser promotion cautions you that if you have any late payments, then that wonderful deal that you signed up for, that promotional rate good through some time into the distant future, is no longer going to be honored. If you don't keep your end of the bargain - by paying on time and not going over your credit limit - then the credit card company does not have to keep their end of the bargain. In fact, they have already pointed out to you what happens in this event - in the smaller print at the bottom of the promotional letter, where it says: "However, all of your APR's (including this offer and any other promotional APR's) may increase as permitted by law up to the 29.99% variable default rate if you pay us late, go over the credit line, or make a payment to us that is not honored." That's certainly not what you expected if you signed on for one of these rates. But unfortunately, that is what you bargained for. You made the deal with the Devil, and now he is knocking on your door for payment. I have seen this practice referred to as "rate jacking", and it is a colorfully descriptive term for what has occurred. Your credit card interest rate is jacked way up because you have made a simple mistake. One day late, and your holiday goose is cooked.
However, all is not lost. Under the terms of the Credit Card Act of 2009 which took effect on Aug. 20, 2009, the credit card issuer must now give you 45 days advance notice that they are going to jack your rate up due to a delinquency or default or as a penalty. Also, effective in February 2010, the issuer cannot apply a penalty rate until the consumer is more than 60 days delinquent on the account. So, if you make that late payment just one time, they cannot then change the deal and jack the rate up. They must send you that 45 day notice, with language in it disclosing the proposed changes; the "effective date, and, a notice that you have the right to reject the changes. They must also disclose if they are will suspend or terminate any future use of your account as a result of your rejection of the change. The notice will give instructions—and a toll-free number—for rejecting the change or rate increase. Follow the instructions carefully, and if you are successful in jumping through their hoops, the telephone voice tells you that you were successful, and gives you a confirmation number. Now get caught up on your delinquent payment. And then go and sin no more.
The new 45 day notice does not apply to an APR increase upon the expiration of a specified period of time, as long as the creditor disclosed clearly and conspicuously in writing the length of the period and the APR that would apply after that period. In other words, if the original offer said "good through August, 2010, with a rate increase in August, 2010", then your credit card company does not have to give you a new 45 day notice. Similarly, if you have a variable rate that was disclosed at the outset, then you will not be receiving a new 45 day notice each time the index fluctuates. In addition to the 45 day notice provision, there is another beneficial (to consumers!) new requirement: the credit card issuer must adopt reasonable procedures designed to ensure that your statements are mailed or delivered at least 21 days before the payment due date. That gives you plenty of time to make sure that next payment is on time.
In summary - don't pay late; if you do, don't ever pay 60 days late if you can help it. If you get the 45 day notice telling you that you are going to be rate-jacked, then don't make any new charges on that card until you have decided whether you want to reject the change. Read on in the notice until you get to the part about rejecting the changes. Follow the instructions for rejecting the changes, and note the confirmation number. If you have any doubt about the consequences of rejecting the change, first call your credit card customer service number, speak to the rep and ask the question - "if I reject this change, and pay the delinquency, am I still allowed to use the card in the future?" Write down the date of the phone call, the customer service rep's name, and the advice that you are given. Then make an informed decision. The rules are changing, and you as the credit card consumer have more rights as a result of the recent changes in the law. Don’t be afraid to use them. That will make for a happier holiday!
©2009 Douglas P. Humes
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