Mortgage Forgiveness Debt Relief Act – Secured Debt Reduction
Seven years after the original Debt Reduction Act was created in 2000, congress drafted this bill to help consumers with debt relief. Originally when a lender would forgive part of the borrower’s debt, the IRS would tax it as income for the borrower. From now through 2012 the IRS will not tax any debt forgiven on a primary residence unless valued at $2 million or more. This allows lenders and borrowers to work together to find a common solution that beneficial and free from taxation.
2010 Credit Card Act – Unsecured Debt Reduction
Through the debt reduction act, this focuses on helping with unsecured debt reduction for the everyday American. The act presents new rules for creditors, most of which are geared toward protecting the average consumer.
Bills now must show how long it will take the cardholder to pay off the balance via minimum payments. This will help consumers create a plan for debt relief by discouraging big charges to the credit card, while encouraging them to pay more than the minimum payment each month.
The act requires:
- Companies to print warnings about interest hikes for late payments
- No increases in interest for the first year
- Increases in interest will only apply to charges made after the change
- Bills to reach the consumer 21 days before the payment is due
- Payments go toward the balance with the highest amount of interest.
- Consumers are notified 45 days before a creditor can raise interest rates or fees on the card.
- Credit card companies also must receive approval from the consumer before they allow an over-the-limit charge.
- Fees are capped at 25% of the credit limit.
Card companies are no longer allowed to do any double billing cycles, so interest can only be imposed in the current billing cycle. Payments made on holidays or weekends will be allowed one business day to process before applying penalties or interest hikes.
The act also is geared toward debt relief for young people. Those under the age 21 cannot register for credit cards without a qualified co-signer. Credit card companies can no longer sell on college campuses.