Putting an end to debt, or putting a crimp on budget?
Q. Could you please tell me the name and the number of the federal law that was passed last year that requires credit card companies to charge their customers 1.5 percent of the remaining balance on your card in addition to the finance charge? What are my rights as a consumer related to this bill requirement? My monthly payments doubled last July when this requirement came into effect and it's really having a negative impact on my monthly budget.
Mindy Sue Cohen, formerly of Peabody
A. There does not appear to be any law passed last year that caused that situation. What you apparently experienced was the result of a change in direction for the credit card industry pushed by several federal regulatory agencies, including the Federal Reserve System, Federal Deposit Insurance Corp., Comptroller of the Currency, and Office of Thrift Supervision.
The suggested changes, first floated in 2003, were intended to stop people from carrying credit card debt in perpetuity. While the changes didn't call for the doubling of minimum payments, that was the result for many by the end of 2005. Not every company instituted the changes at the same time. Banking regulators urged, but didn't require, credit card companies to establish a minimum payment, including fees and penalties, which would allow a cardholder to pay off his or her debt in a reasonable period of time. Previously, it was possible to pay the minimum every month and, depending on the amount of debt and interest rate, never cut into the principal.
You could shop for a credit deal that affords you a lower interest rate and payment. But your 1.5 percent minimum is on the low end. Carrying debt is a huge burden and any reputable financial adviser would suggest you do whatever you can to reduce - and then eliminate it. It's definitely easier suggested than done.
Q. Is there any recourse for the holder of a gift card to a restaurant that suddenly goes out of business? My husband bought a $100 card to Vintage in West Roxbury at a charity auction a few months ago and, without warning, they closed their doors.
Patricia MacDonald, Canton
A. Several people have posed similar questions. For the most part, it's a losing proposition for consumers. If the business continues in some form, you could press for your card to be accepted. And, the state Office of Consumer Affairs suggests a small claim lawsuit for breach of the gift certificate law as an option. Perhaps even more frustrating than your experience is what cardholders from stores such as Sharper Image experienced: the inability to redeem their gifts because the store filed for bankruptcy protection. On a positive note, Linens 'n Things, which filed for bankruptcy last month, asked for, and received, permission from the court to continue to accept its gift cards.
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