Though most consumers (61%) are aware there are new credit card protections, most (65%) do not know they take effect later this month and do not understand the specific protections Congress approved last year, a recent survey commissioned by the Consumer Federation of America and CUNA reveals.
“We are especially concerned that some consumers will base their future credit card use on protections that don’t exist,” says federation Executive Director Stephen Brobeck, noting, for example, that 36% of credit card users believe the new law caps late fees at $35, while 31% believe it caps interest rates at 20%. The new law does neither.
The survey also reveals that a large majority of consumers who have noticed disadvantageous changes in the terms of their most frequently used credit card are taking or plan to take some kind of remedial action, most often using the card less frequently (69%) and/or paying off the remaining balance faster (62%).
“We are encouraged that 85% of consumers reported planning or taking action when aware of a rate hike, new fee, lower credit limit, fewer rewards or other disadvantageous terms,” says Bill Hampel, CUNA’s chief economist.
Most provisions of the credit card law, which was approved by Congress and signed into law by President Obama last year, take effect Feb. 22. The law requires card issuers to provide at least 45 days notice to most customers before making significant changes to their card, such as hiking the rate or fees; to inform customers on their monthly bill how long it will take to pay off their balance if they make only minimum payments; to mail a monthly bill at least 21 days before payment is due and not use holidays and weekends as an opportunity to levy late fees; and to apply payments to the highest-interest balances first.
The law also prohibits card issuers from, in most cases, increasing the card’s interest rate in the first year of the account and applying any increase in rates to old charges, charging an over-the-limit fee unless the customer affirmatively authorizes over-the-limit charges, issuing cards to consumers younger than 21 unless they show they have the ability to make payments or get a co-signer, and using double-cycle billing where interest charges are imposed on purchases that have already been paid off.
For the research, Opinion Research Corp. polled 1,013 adult Americans Jan. 28 to 31. The margin of error is plus or minus three percentage points.
