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Federal Laws Can Damage Credit History

By Faye Mergel
Published: Sunday, July 11th, 2010

98844078The Credit Card Accountability Responsibility and Disclosure (CARD) Act simply known as Credit CARD Act of 2009 has opened portals to fair treatment to credit card holders and merchants. The problem is not all people are satisfied with the passed federal law which was passed earlier this year. Though the Act prevented excessive payment of fees on the credit cards, the act did not limit price controls, rate caps, and fee setting. The act does not limit how high interest rates can go. The act does not apply to business or corporate credit cards.

The act has stated several of the positive benefits it could provide. Existing credit cardholders will avoid retroactive increased interest rates and will have more time to pay their monthly bills. It also provided credit card users to refuse contractual changes on their accounts.

Problems or “loopholes” the credit card industry has noted in the act included the negative effects on the credit cardholder’s credit score and credit report. Customers with bad credit may be given a less desirable credit report since they will become more exposed to the risk of financial failure. Many credit card experts and advisors have claimed that the act would result to higher interest and annual fees and lowered credit limits for customer with bad credit. High interest rates and lower credit limits lessen customer credit scores and makes credit reports look bad. Furthermore, with the high rates charged to their bills and the less credit limit combined, the card holder will be having more time to cook up enough amount to cover the debt. Advisors provide general tips to help the credit card holders repair their credit history, but many still complain that the new act has created a situation where cardholders need more than just those common advises.

The main problem that lies in the new act is that not all credit card problems are considered and focused thoroughly. Customers even say that they aren’t benefited by the new act at all. There are many unregulated areas that can damage their credit reputation more and that could put their scores to the low range. Credit card experts who oppose these rules state that banks and credit card issuers can still come up with new and innovative ideas that will increase the cash received from customers. In fact, new fees that customers do not recognize have appeared in many credit card bills.

Furthermore, credit card holders claim that the act could take out the opportunity for low-income holders to be allowed credit. Since lenders rely on the credit reports and credit scores as their basis in approving loans, those whose income are low and can only provide minimum payments are in danger for higher interest rates and denial for loan.

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