On May 22, 2009, President Obama signed into law the Credit Card Accountability, Responsibility and Disclosure Act (or Credit CARD Act) of 2009. The Act significantly increases the protection offered to consumers by altering how credit card issuers market, advertise and manage consumer credit cards.
The first provisions of the bill became effective on August 20, 2009, including the requirement that monthly statements be delivered to consumers a minimum of 21 days before the monthly payment due date. Additionally, credit card issuers must notify consumers of significant account changes a minimum of 45 days before changes become effective. If the changes increase the applicable interest rate, the consumer has the right to opt out of the increase and retain the existing interest rate until the balance is paid off. However, when you opt out, future purchases on the card are prohibited.
The majority of the remaining provisions of the bill become effective on February 22, 2010. These include the following:
Interest Rate Increases
Interest rates cannot be increased in the first year and retroactive interest rate hikes are prohibited, except in the following situations:
- The credit card has an introductory-offer period that ends within the first year.
- The interest rate on the credit card is variable and follows an index.
- The consumer is more than 60 days late on a payment.
- The consumer completes a workout plan or fails to comply with the terms of a workout plan.
If a retroactive interest rate increase is issued, the consumer may receive an interest rate reduction after six months, assuming all monthly payments are timely and the credit limit is not exceeded.
Interest rates cannot be increased because of a consumer’s payment records on unrelated accounts such as utilities.
Interest Rates, Terms and Fees
If a consumer is subject to different interest rates on separate balances of one credit card, any monthly payment amount in excess of the required minimum will be allocated to the balance with the highest interest rate first.
The due date for monthly payments must be the same day every month. Additionally, if the credit card issuer changes its payment mailing address, late payment fees cannot be charged during the 60 days following the address change.
A consumer must choose to have the option of making purchases beyond the credit limit and acknowledge that fees may apply. Otherwise, any purchases over the credit limit will be denied.
Consumers must be informed that they are entitled to receive one free credit report each year from each credit bureau from the official website AnnualCreditReport.com.
Consumers must be notified of the financial impact of paying only the minimum monthly payment; such as the time required to fully pay off their balance; how much will be paid including interest, and how much is required each month to fully pay off the balance within 36 months.
College students cannot be enticed to open a new credit card account through the offering of free gifts, such as shirts or hats, within 1,000 feet of campus. Additionally, consumers under the age of 21 must have an adult co-signer, or prove that they have the financial capacity to repay the credit card debt in order to open a credit card account.
For more information on this topic, please contact Henssler Financial at 770-429-9166 or [email protected].