The Credit Card Accountability, Responsibility and Disclosure Act of 2009: What it Means to You

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit CARD Act) was signed into law by President Obama on May 22, 2009. The Acts aims to level the playing field between cardholders and card companies by introducing new rules the credit card industry will have to follow in an attempt to protect consumers. Many of the provisions set forth by the Act will significantly affect you, the cardholder.

The various provisions of the Credit CARD Act will go into effect at different times, starting 90 days from the date the bill was signed to fifteen months. The majority of the provisions go into effect on February 22, 2010.

Here is how the Credit CARD Act will impact you:

Provisions Effective After 90 Days (August 20, 2009)

Account Changes
  • Card issuers must provide at least 45 days advance notice to the account holder of any changes, including a change in the interest rate, in regards to their cardholder agreement.
Credit Card Statements
  • Credit card statements must be sent at least 21 days prior to the due date.
  • Payments received before 5:00 p.m. on the due date are “on time.”

Provisions Effective After 9 Months (February 22, 2010)

Charging Interest
  • A card issuer cannot raise interest rates in the first year after an account is opened.
  • Retroactive increases in interest rates on existing balances are prohibited unless: the minimum payment is not received within 60 days of when it is due.
  • The rate increase is under a variable interest rate.
  • It is the end of a promotional rate. However, promotional rates need to be in effect for at least six months for the exception to apply.
Billing Practices
  • Card issuers are prohibited from charging a finance charge based on the double billing cycle method. This means card companies cannot charge interest on debt a cardholder has already paid.
  • Card issuers cannot charge a fee on an outstanding credit card balance at the end of the billing period if the fee is from interest accrued on an outstanding balance that was fully repaid in the last billing period.
Credit Limit
  • Requires card companies to offer consumers the option of having a fixed credit limit that cannot be exceeded.
  • No over-the-limit fee may be imposed by a card issuer if the cardholder exceeds that limit, without the express consent of the cardholder.
  • A credit card company may only charge a maximum of three over-the-limit fees for the same transaction.
Payment Application
  • Any excess amount of payment received that is over the minimum monthly payment must be allocated to the card balance bearing the highest interest rate first.
Enhanced Disclosures
  • A written “Minimum Payment Warning” must be composed informing cardholders making only the minimum payment will increase the amount of interest they pay and the time it should take to repay their balance.
  • Card issuers must inform cardholders of the number of months (rounded to the nearest month) that it would take to pay the entire amount of their balance, if the cardholder pays only the minimum payment.
  • Card issuers must inform cardholders how much the cardholder will pay in total if the cardholder pays the minimum amount each month
  • Card issuers must inform cardholders how much they would need to pay each month in order to pay off the balance in full in 36 months.
  • Card issuers must provide a toll-free number which cardholders can call to obtain information regarding credit counseling and debt management services.
Underage Consumers
  • Card issuers cannot solicit credit cards to anyone under the age of 21.
  • Card issuers cannot provide credit to anyone under the age of 21 without a parent or legal guardian co signing on the account, or unless the underage consumer can show independent financial means to repay the credit obligation.

Provisions Effective After 15 Months (August 22, 2010)

Interest Rates
  • A card issuer that increases the annual percentage rate applicable to a credit card account must do so based on factors including the credit risk of the cardholder, market conditions, and other significant factors. Plus, the card issuer must consider changes in such factors when determining whether to reduce the annual percentage rate for such cardholder.
  • A card issuer must review, every 6 months, accounts for which the annual percentage rate has been increased since January 1, 2009, to assess whether such factors have changed (including whether any risk has reduced).
  • In the event of an increase in the annual percentage rate, the card issuer must provide in the written notice stating the reasons for the increase.
Gift Card Provisions
  • It shall be unlawful for any person to impose a dormancy fee, an inactivity charge or fee, or a service fee with respect to a gift certificate, store gift card, or general use prepaid card.
  • It shall be unlawful for any person to sell or issue a gift certificate, store gift card, or general-use prepaid card that is subject to an expiration date.
  • Gift cards must include information on them related to fees, expiration information and a telephone number for assistance (effective January 31, 2011)

To view the Credit Card Accountability Responsibility and Disclosure Act of 2009 visit: http://www.creditcardreform.org/pdf/credit-card-bill-2009.pdf

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