Credit CARD Act

Financial experts consider the upcoming credit cardholder regulations, to go effect on February 22, the most important of the three series of changes included in the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, enacted in May 2009. The 22 changes in this phase provide greater restrictions on interest rate increases.

Rate changes: One of the most frustrating concerns of consumers is how rates were arbitrarily changed. The new rules require:

A 45-day notice of rate changes–except prime rate fluctuations on variable-rate cards
Existing balances can’t be raised unless payment is made more than 60 days late.
Pay at least the minimum payment on time for six months and an increase from paying late must revert back to the lower one.
Only promotional introductory rates can go up during the first year after an account is opened.
Promotional introductory rates must be in affect for a minimum of six months.

Fee changes: While rate changes are not too obscure, fees are often found in the small print. The new rules are as follows:

Over-the-limit fees can only be charged if you authorize payment for charges that put you over your limit and opted in to accept a charge for the service. (Card issuers are still free to decline purchases above your credit limit.)
No over-the-limit fee is allowed when interest charges or fees put the account over the limit.
When over-limit fees are permitted, an issuer cannot charge the over-limit fee beyond once per billing cycle.
When the interest rate on a credit card is raised due to the payment being 60 days late, the credit card provider must then bring the rate back to the original interest rate if payments are made on time for a minimum of six months.

Changes to how payment is made:

Payments over the minimum due will be credited to the highest interest rate portion of your bill.
No fees are allowed for payments by mail, electronic transfer, telephone authorization, or other means, unless the payment involves an expedited service by a service representative of the creditor.
Payment due dates must remain the same for every month.
Grace periods must be a minimum of 21 days.
Payments at local branches must be credited the same day as they’re deposited.
You can’t be charged interest when you pay your bill in full, on time.
A payment due date that falls on a weekend or a holiday will be accepted as payment on the next business day, without treating it as a late payment. Also, all payments received by 5 p.m. must be credited the same day and not pushed back to the next day causing a late payment issue.

Changes to disclosure of terms and conditions

Monthly statements must clearly show

Your card issuer must tell you, on renewal, of any changes to your credit card terms and conditions

The issuer must disclose how long it will take you–and how much it will cost you–to clear your balance if you make only minimum payments
Your statement must make clear the payment due date and any penalties for lateness
Changes to fees and finance charges (as well as rates) can only be made after you’ve received 45-days’ notice

5. Protections for Young Consumers

Those under 21 years can only open an account if the credit card application is signed by a parent, guardian, or other adult who will be responsible for the debt–unless the young person has independent means
There will be more strict controls over the marketing of cards to students
Pre-screened offers to young people will also be limited

January 5th, 2010
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