Will New Credit Card Laws Help Indebted Consumers?

The Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act) of 2009 changed how credit card companies and consumers interact. It also changed the prospects for credit card debt reduction and debt management. Every consumer that uses a credit card and has gotten into trouble with a credit card company knows what can happen: shortened billing periods, interest rate hikes and extra fees. The Credit CARD Act is meant to amend this situation by tipping the scales in favor of the indebted consumer. The Act does not mention credit card debt reduction, but it does change the rules.

Debt consolidation can still work under the law which went into full effect on August 22, 2010. The Federal Reserve issued detailed guidelines for businesses and consumers in response to the law. These guidelines reveal the precise details of the new law. Specifically, the required length of time between sending a bill and the due date of the bill is increased. Additionally, consumers must be notified in advance of pending interest rate hikes. The Credit CARD Act makes it easier for consumers to deal with credit card companies.

In terms of debt management, indebted consumers still have the standard set of options available to them: credit cards, balance transfers, debt consolidation loans and credit counseling services. Credit card companies sometimes offer balance transfer services featuring low introductory interest rates. Since the objective is to transfer all outstanding balances to the card with the lowest rate, this works rather well. Balance transfer plans fail if the introductory or low-rate period ends before the debt is paid off, so the borrower must move quickly. Borrowers must also read the fine print to understand what is required of them and the potential pitfalls.

Debt consolidation loans are more risky. The temptation is to use the loan as another source of spending money, which often happens under this kind of scheme. Unsecured and secured debt consolidation loans can simply be another source of debt rather than a resolution to existing debt. Foreclosure may result from defaulting on a second mortgage, for instance.

Credit counseling may be the debtor's best bet. An accredited credit counselor can help a debtor set up a repayment plan. The counseling agency interacts with creditors on behalf of the debtor, sparing the debtor from the unpleasantness of facing the creditors' wrath. Credit counseling is just what the doctor ordered for an incorrigible spending problem.

Arrow  Debtor Law Lawyer

  Tetra Lawyer Directory > Finance Lawyer > Debtor Law Lawyer