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Restrictions on credit card interest rates

Kentucky residents may be aware that the Credit Card Accountability Responsibility and Disclosure Act, which was passed in 2009, placed a number of new restrictions on credit card companies. One of the most significant changes brought in by the law was a strict set of rules governing when an issuer could increase interest rates and by how much the rates could go up.

When credit card companies wish to significantly raise the interest rate on a credit card debt, they are now required to notify the account holder at least 45 days in advance. Retroactive rate increases are generally no longer permitted, so the increased rate will usually be applied only to new charges made on the account. However, issuers may increase the rate of interest on an existing balance in certain situations. An expiring promotional rate is a commonly cited example..

Credit card issuers are permitted to raise interest rates when payments on the account fall 60 days past due. This is known as a penalty APR, and it must be adjusted back down once the account has been brought up to date and payments have been made in a timely fashion for six months. The 2009 law also allows credit card holders to close their accounts without penalty if they object to an interest rate increase. However, credit card companies may require that the balance on a cancelled card be paid within five years.

Many people facing financial difficulties rely on the use of credit cards to help with the payment of bills, but this often does more harm than good. A bankruptcy attorney will be familiar with how easily people can fall into the credit card trap and can explain the various debt relief strategies available that could provide a financial fresh start for a client.

Source: FOX Business, "Can My Credit Card Company Raise My Interest Rate?", Christine DiGangi, Feb. 27, 2015

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