Consumers who have been making at least minimum monthly payments on their credit cards may be curious about how new changes in the law might affect them. Regulations restricting credit card issuers go into effect on February 22, 2010. Credit card companies are constantly monitoring the credit reports of their customers and would increase interest rates based on overall credit scores. While this new law will not completely eliminate increases in interest rates, their ability to increase interest rates on existing balances would be limited. The rates would only increase in cases where a promotional rate ends, the card has a variable rate or the cardholder makes a late payment. Interest rates on new transactions can only increase after the first year. In addition, interest rates on existing balances cannot be increased because of “universal default” on other credit accounts prior to forty-five days of notice.
While interest rates themselves would not be limited, the restrictions on rate increases might cause card issuers to make demands on payment sooner and therefore force their account holders into bankruptcy. Cardholders are also given under the new rules at least twenty-one days to make payment before incurring default. Card would have to enabled to allow for over-limit spending, which would otherwise be prohibited. Card applicants under the age of twenty-one would be required to have an adult co-signer on their account if they lack the income to make regular payments.
Basically, the new law just means that credit could be harder to come by and also incentivizes people to pay off their balances quicker rather than postponing their agony and thereby allowing the interest rate to ride up on their existing balances.
Disclaimer: This does not constitute legal advice. Please consult a qualified bankruptcy practitioner in your jurisdiction on how and if the above law may affect you.
February 4th, 2010 by Administrator
A co-signer is a person who has good credit and can help someone establish their credit by co-signing on the credit card application. This need not necessarily be a credit card application, it may also be a loan on which they can co-sign. Basically what this means is that they would take responsibility for paying the debts if the person whom they co-signed the application for defaults. For example, if Jim (who has good credit) agrees to co-sign an application for Joe (who does not have good credit), and Joe defaults on the credit card balance or loan, then Jim would have to bear the responsibility of paying the debt. Even if Joe files for bankruptcy and discharges the credit card/mortgage/car loan debt, then Jim is still responsible for paying the balance.
An authorized user on the other hand does not co-sign the credit application and therefore does not assume responsibility on the debt. An authorized user can use the credit card (with approval from the credit card holder) but the burden remains on the credit card holder to pay the debt. If Jim is only an authorized user on Joe’s credit card accounts then he does not bear responsibility for paying Joe’s debts. Jim can go to town maxing out the credit card limits and still not be responsible for any of the debts. This would be Joe’s sole responsibility.
So, when you file bankruptcy please be aware of the consequences of being a co-signer. If you think you are an authorized user, you may be just that, but you would be wise to check your credit report and possibly consult a bankruptcy attorney in your jurisdiction. I had a client call me earlier vehemently arguing that he was only an authorized user, but the credit card company had filed a lawsuit and obtained judgment against him as the primary card holder had filed for bankruptcy. As sleazy as credit card companies can be, they probably would not be able to obtain judgment against you if you had as you say, only been an authorized user. A lawsuit is no small matter, it means that it’s time to take the complaint seriously.
A bankruptcy attorney would be able to prevent this situation in the first place. If you have any questions, consult a bankruptcy attorney in your jurisdiction.
August 3rd, 2009 by Administrator
