Credit card issuers face restrictions

WASHINGTON – The first phase of the landmark credit card legislation signed by President Obama in May will take effect this week, forcing card issuers to give consumers more time to pay their bills and to consider interest rate increases.

Starting Thursday, issuers must give customers 45 days’ notice before raising their interest rates, instead of 15 days as previously required. Customers can then choose to pay what they owe at the original rate over time but will not be able to use the card for future purchases.

The issuer reserves the right to increase the minimum payment, as a percentage of the total balance, to no more than double the percentage it had been. Card issuers will also have to mail bills 21 days – instead of 14 days – before the due date.

Consumer advocates praised the new rules but said significant relief will not come to cardholders until February, when most provisions of the law will be implemented. “This is a really good first step,” said Gerri Detweiler, a credit adviser for Credit.com, which tracks the credit card industry.

The law will eventually prevent card companies from raising interest rates on existing balances unless the cardholder is at least 60 days late making a payment. If the cardholder pays on time for the next six months, the old rate must be restored.

Companies must also receive customer permission before allowing them to go over their limits for a fee. Interest charges on debts that are paid on time, a practice known as double-cycle billing, will be also be banned. Several other provisions of the law require better disclosure of terms and conditions.