Credit card companies can no longer hide silently as they levy high interest rates to millions of consumers. According to the Fair and Accurate Credit Transactions Act of 2003, credit card companies must now provide customers with the explanations behind their interest rates.
The new federal law, which went into effect on January 1, mandates that all lenders provide notice to cardholders who will receive higher interest rates than the company's best customers, specifically those who are affected by bad credit information. "This new rule will force credit card companies to disclose if you did not get the best rate and they will have to explain why you didn't," Bill Hardekopf, chief executive of of LowCards.com, said in a statement. Consumer credit card interest rates are most often decided under the Risk-Based Pricing Rule, which motivates companies to determine interest rates based on a consumer's credit history. The new law marks the first time credit card issuers will have to detail their decision-making. According to FICO representatives, more than 1 billion credit applications will be processed in 2011, with more than half expected to result in disclosure notices and newly federally-required free credit reports