The Credit CARD Act, otherwise known as the Credit Card Accountability
Responsibility and Disclosure Act of 2009, was passed on May 22, 2009 by the
United States Congress and subsequently signed by President Obama. This act is
intended to provide a comprehensive credit card reform and the legislation
ensures that credit card companies establish transparent and fair practices when
extending credit to consumers.
Card companies can no longer arbitrarily raise interest rates
The new legislation ensures that cardholders are protected from arbitrary raises
in interest rates and requires credit card companies to give 45 days-notice of
interest rate increases. Cardholders who cancel their card are given the right
to pay off the balance at existing interest rates even if interest rates are
raised. Cardholders are given 3 billing cycles to decline new terms imposed by
credit card companies. Credit card companies are no longer able to retroactively
increase their interest rates on an existing balance if the cardholder is in
good standing and the reasons for the increase are not related to cardholder
behavior. Card companies are prohibited from changing the terms of the contract
they have with the cardholder and can no longer arbitrarily raise interest rates
Double-cycle billing is now prohibited
Cardholders who pay on time can no longer be penalized and prohibits card
companies from double-cycle billing practices. Customers who had a rate increase
and have paid on time for a period of six months must have their interest rates
returned to what the rate was before an increase was made. Creditors have to
review the payment history and then determine if a rate increase is warranted.
With the Credit CARD Act, cardholders are protected from any due date gimmicks.
Card companies now have to mail their statements 21 calendar days before the
bill is due. The previous time was 14 calendar days prior to the due date. The
act requires that the due date be on the same day each month. If weekends or
holidays intervene then the due date is the next business day. All statements
must now contain internet access and phone numbers so that customers can have
easy access to pay balances. Card companies are no longer allowed to charge late
fees if the cardholder has proof that payment was mailed 7 days before the bill
Misleading terms must be made clear
Cardholders are now protected from misleading terms such as "prime rate" and
"fixed rate". People who apply for a credit card but then decide not to keep it
can now reject the card until the moment it is activated without it adversely
impacting their credit rating. Creditors must now have a minimum sized font on
all statements so that credit card terms can be more easily read. Card companies
are prohibited from imposing excessive fees on those who hold credit cards.
Over-the-limit fees are now restricted over the course of 3 billing cycles.
Unless credit card holders notify creditors they permit approval of
over-the-limit charges they are not allowed to be charged a fee for this.
Accounts that have balances over the credit card limit are only allowed to be
charged fees if bill payment is late.
Statements must have information on length of payoff time
Creditors are required to print on bill statements how long it will take for the
cardholder to pay off the card if only the minimum balance is paid each month.
The statement must also show how much interest is added over the course of the
debt if only the minimum payment is made. The statements must further include
information on the amount of money that should be paid each month to allow the
cardholder to pay off the debt in three years. Credit cards to teens are limited
by the Credit CARD Act and credit cards cannot be issued to anyone under 21
years of age unless there is a co-signer over 21, or proof of an ability to
repay is provided.
These new requirements have made a big impact on the often unfair and
arbitrary charges that were routinely imposed by card companies. Cardholders now
have legislation to protect them from unfair business practices. The practice of
giving credit cards to teens often led to young people having large credit card
bills by the time they reached their twenties. Teenagers and young adults often
do not have a large disposable income and late payments were often incurred.
Late payments have an impact on credit scores and often the young cardholder was
adversely affected by low credit scores that could take years to bring back up.
This legislation was needed to curb the anything goes credit company mentality
that imposed ever larger fees and charges for any small transgression. People
wishing to take out loans to pay their credit card off sooner may wish to check
calculator to see what the potential savings can be.