Understanding the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009
Posted by Tracy Kerscher | August 5th, 2009 | General Information, New Rules
With all of the talk in the media lately regarding the economy, budgets and bailouts, many of us are aware of the new act being implemented to protect consumers against unfair practices by credit card companies – the Credit Card Accountability, Responsibility, and Disclosure Act of 2009. As consumers, it is imperative to recognize the role that irresponsible credit card use has played in the current state of the economy. However, moving forward, it is equally as important to understand our rights as consumers and credit cardholders. Here is some background to help better familiarize you with the Credit Card Accountability, Responsibility, and Disclosure Act of 2009.
The Credit Card Accountability Responsibility and Disclosure Act of 2009, or Credit CARD Act of 2009, is a federal law passed by the United States Congress. It was signed into law by President Barack Obama on May 22, 2009 and will become effective on Feb. 22, 2010. It is a wide-ranging reform legislation aimed at establishing fair and transparent practices related to credit cards.
The act was introduced in the House of Representatives on Jan. 22, 2009. The main motivation behind this act is to put an end to certain deceptive practices used by credit card companies often that land consumers in debt: practices such as arbitrary and retroactive rate increases, double-cycle billing and over-the limit charges. The impetus behind the act recognizes that while consumers can avoid many of the problems resulting from these practices by using credit cards wisely and paying off their bills on time, it is also essential for the card companies to behave responsibly and fairly towards their customers.
Some of the major changes introduced in the law include:
Arbitrary Interest Rate Increases:
- Credit card users must be given at least 45 days notice of any other interest rate hikes.
- Interest rates on existing credit card balances cannot be increased unless a card user is at least 60 days late on payment.
- Cardholders have the right to cancel their card and pay off their existing balance at the existing interest rate and payment schedule if there is an interest rate hike.
- Card companies cannot retroactively increase interest rates on the existing balance of a cardholder in good standing, thus avoiding the “universal default” rate increase wherein the card company can raise the interest rates of a car user based on the customer’s behavior on another unrelated account.
- If the credit card company does increase the interest rate, once the customer makes six months of on-time payments, the interest must be set back to the original rate.
- Credit card companies cannot arbitrarily change the terms of their contract with a cardholder. This provision bars the practice of “anytime, any-reason re-pricing.”
- Interest rates cannot be increased in the first year of a card user with a card company.
- Promotional interest rates must last at least six months.
Due Date Protection:
- Billing statements must be mailed 25 days before the due date instead of the current 14-day current minimum.
- Payments made before 5 p.m. EST on the due date are considered on-time payments.
- Card companies must provide a phone number and internet address on every statement to enable a cardholder to pay off balances.
- Card companies cannot charge a late fee if a payment is late due to a delay in processing or when a cardholder presents proof of mailing his/her bill within 7 days of the due date.
No Penalties On-Time Payment:
- Credit card companies cannot charge interest on debt that is paid on time during a grace period thereby preventing the “double-cycle billing” practice.
- Card companies cannot impose fees on the remaining interest-only balance of a cardholder who has paid his/her bill on time.
Set Limits on Credit:
- Credit card companies will be required to provide consumers the option to have a fixed credit limit that cannot be exceeded.
- Card companies cannot charge over-the-limit fees on a cardholder with a fixed credit limit.
- Gives cardholders who get pre-approved for a card the right to reject that card up until the moment they activate it without having their credit adversely impacted.
Fair Allocation of Payments:
- Card companies must allocate payments fairly on balances at different interest rates thereby allowing the card user to pay off a higher interest rate balances first.
Better Management of the Credit Card Industry:
- Existing data collection on industry profits including card fees and rates must be presented to Congress every year.
New Rules for Consumers Under 21:
- Individuals under 21 must get a parent or legal guardian to co-sign for a card. To be exempted from this requirement, individuals with their own income must submit proof.
New Gift Card Rules:
- Gift cards or certificates must have clear and unambiguous fee information printed on the cards.
- Gift cards and certificates cannot expire before five years from the card’s original issue date.
More information can be found at:
Tags: Card act of 2009, consumer protection from credit card companies, Credit Card Accountability Responsibility and Disclosure Act of 2009, Credit CARD Act of 2009, credit card regulation, obama credit card rules
Filed under: General Information, New Rules |
One Response to “Understanding the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009”
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Peter Knight Says:
August 7th, 2009 at 1:20 amFinally I found an easy to “get” article! Thank You
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