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Federal regulators have approved new rules for the credit card industry, hoping to save consumers from unfair interest rate hikes and other practices.
Experts say these changes are great for the average consumer. But if you have business credit cards, the new regulations won't help much at all.
You've heard the horror stories, credit cards with a 10 percent interest rate one day and the next day it's up to 30 percent. And this was all legal for banks and credit companies to do. Eva Rees, with the Utah Department of Financial Institutions, "I don't know if I can say they're blatantly taking advantage because the law has allowed them to do that."
Now, credit card companies will not be allowed to raise interest rates retroactively. "Say you have a credit card with a balance of $2,000 and the company decides to raise interest rates. "The $2,000 balance will continue to accrue interest at the existing rate," said Rees. "The higher rate will only apply to new purchases."
In addition, companies must give consumers 45 days notice before any changes are made to the account instead of the usual 15 days.
Experts say the changes could make it more difficult for millions of people with bad credit to get what is known as a subprime card. And as the Utah Department of Financial Institutions indicates....these protections only benefit personal credit cards. "So this sort of change to the credit card practices would not apply to any credit card that's issued to a business for business purpose," Rees said.
For example, a company called Advanta, based here in Salt Lake, issues credit cards for use by businesses and received hundreds of complaints for jacking rates unfairly. But Advanta pointed out that the Utah's Better Business Bureau investigated and found they were operating under the law; mailing out notices to customers to let them know about the rate increases and reminding them they had to opt out in writing and stop using the card.
The new policies assume businesses are careful about their credit arrangements. Rees said, "In Utah our Legislature has kind of taken the position of, if you're in business, you're responsible for your decisions. I think that's pretty much true across the country."
All the changes won't take effect until July 2010. For now, experts say to call your credit company and negotiate a lower rate.
E-mail: ngonzales @ksl.com
