Consumers to benefit as credit card law debuts

Wed Aug 19, 2009 4:05pm EDT
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By Juan Lagorio

NEW YORK (Reuters) - U.S. consumers will see on Thursday the first signs of the biggest overhaul of the credit card industry in at least two decades, as companies will be forced to provide customers with more time to pay their bills and be required to give more warning of contractual changes.

From August 20, credit card issuers will have to give clients at least 21 calendar days to pay monthly bills and will have to warn consumers 45 days in advance of major changes in conditions, under provisions of a law signed in May by President Barack Obama.

Now, credit card issuers have to mail bills at least 14 days in advance and provide a 15-day notice of changes in terms.

Consumers will also be able to reject the changes set by credit cards, and arrange a plan to cancel the debt and close the credit card account.

"It evens the amount of power between consumers and credit card companies, but it doesn't prevent credit card companies from charging really significant interest rates if they can find a reason to do it," said Jamie Court, president of consumer advocate group Consumer Watchdog.

Some of the biggest changes to the credit card industry look to limit the ability of companies to impose fees, raise interest rates or sell credit card to students, but those will not go into effect until February.

"Those are the ones the card issuers are trying to grapple with to see how to keep the business profitable," said Jason Arnold, an analyst at RBC Capital Markets.

Credit card firms enjoyed hefty profits earlier in the decade, as cheap money ignited a lending boom. American Express Co, usually considered a credit card company for wealthy consumers, became the fastest-growing firm by expanding among less affluent clients.   Continued...

<p>A shopper uses her credit card to pay for a purchase on "Black Friday", one of the most important days for retailers at a K-Mart store in Burbank, California November 28, 2008. REUTERS/Fred Prouser</p>