There has been a lot of misconception and misleading information regarding the credit card debt relief act. It's not because the government has issued a misleading statement or that they were not able to explain it to the public well, but more than, the presence of the ever ready scammers. The consumers must remember that each time the government issues an act, may it be referring to money or debt relief, or not, the opportunists are just nearby, quick to twist facts to profit from it.
So what exactly is the Credit Card Debt Relief Act?
It's officially called, The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD). And here's a quick look at what it says:
– The credit card company can only increase the interest rate if the consumer's payment is 60 days late.
-Unless the consumer has asked for an over-limit fee, the creditors can not charge the consumer for it. Also, banks may not charge late fees if they were also late in crediting a payment.
-Credit card companies may not market to people under the age of 21, without parental permission, or verification of their ability to pay.
-Credit card companies must give the consumers 45 days before they can up the interest rates.
-The consumer's payment must first be applied to the highest interest rate balance.
President Barack Obama enacted that bill because of the growing number of consumers filing for bankruptcy, pointing credit card debt as one of the main reasons. The act was effective February 2010. In line with this, and regarding the scammers, the act is not about giving consumers some money to eliminate their debt. Remember that it's not the government's responsibility to shoulder private individual's credit card debt. So if there's anyone saying otherwise, be wise, and pay them no attention.
As for real debt relief, there is an industry dedicated to debt relief, and prevention of bankruptcy filing. Depending on the amount owed and account status, the consumer can do, either credit counseling or debt settlement.
Debt settlement is also known as credit card debt consolidation . It works best with past due accounts and total debt amounts of $ 10,000 or more. Past due accounts mean that they have not been paid in months, specifically 5 or 6 months, which is the IRS deadline for creditors to write off bad debts. If the creditor is not one to sue clients for months of non-payment, the account would be assigned to a third party collection agency, where debt negotiation is very possible. If the account is with a third party collection agency, the chances of settling for more or less half of the original amount of debt, is high.
The original creditors are known to avoid debt settlement, if the account is still current, because logic dictates that the consumer can still afford to pay. While nonpayment for months on, tells them explicitly that the consumer can not afford to pay anymore. And savvy business people that they are, if asked for a discount or a reduction of the balance, they're rather get something than nothing from the consumer. So debt settlement works for consumers in a desperate credit card debt situation.