On May 22, 2009, President Obama signed the Credit Card Accountability,Responsibility, and Disclosure (CARD) Act of 2009. “Just as we demand credit card users to act responsibly, we demand that credit card companies act responsibly too,” he said before signing the Act. Do you know what it says and what it means for you?
The purpose of the bill is to amend the Consumer Credit Protection Act, to ban abusive credit practices, enhance consumer disclosures, and protect under age consumers among other things.
Several new rules to curb some of the worst industry practices go into effect this month, August 20th. Most of the provisions kick in next year. The requirements under the CARD Act become effective in 3 stages.
What are some of the requirements?
- Creditors must provide written notice to consumers 45 days before an interest rate increase or making a significant change to account terms. Currently, only a 15 day notice is required.
- Creditors must inform consumers in the same notice of their right to cancel the credit card account before the increase or change goes into effect.
- Creditors must mail or deliver statements for credit cards at least 21 days before payment is due. Starting in February, due dates must be on the same day each month. If your due date falls on a day that the creditor does not accept payments by mail (holidays or weekends), the creditor cannot treat a payment received the following business day as late.
- The Act places limits on fees and interest rate charges.
- It requires payments to be applied first to the credit card balance with the highest rate of interest.
- It prohibits late fees if the card issuer delayed crediting the payment.
- It prohibits card companies from charging late fees when a cardholder presents proof of mailing payment within 7 days of the due date.
- The law prohibits card companies from raising interest rates on existing balances unless the borrower pays at least 60 days late. If the cardholder pays on time for the following six months, the company will have to restore the original rate.
Interestingly, under the CARD Act, one way issuers can raise interest rates on existing balances is when the card carries a variable interest rate so several major banks are moving from fixed rates on credit cards to variable. Even companies who offer fixed rates print on the back of your statement (in tiny print) that they reserve the right to take back that rate.
Card executives have said the changes would prevent them from properly distinguishing between risky and non-risky borrowers and force them to charge everyone higher rates and annual fees or withhold credit.
If you pay attention, you may have noticed that interest rates and minimum payments have been rising at the same time credit limits are being drastically cut. Now, apparently, something more is being done to protect the consumers. Thing is, if you don’t know the rules, you won’t know if you’re getting the benefits. If you don’t know you’re rights, you can’t make sure you’re receiving them.
Read the entire section by section summary at banking.senate.gov. Be informed and be smart with your credit.