What You Need to Know About the Credit Card Reform Act
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD) became law on May 22, 2009 but most of the provisions did not take effect until February 22, 2010. The main purpose of the Act is to provide consumers with protection and Public Accountability.
It bans all unfair and consumer unfriendly practices used by companies. The company should have a policy of clear and simple disclosure. Companies are now required to give a minimum 45 day notice before making any changes in the terms of their credit agreement. They must also advise card holder that they may cancel their account.
This gives the card holder the opportunity to cancel their account and refinance the card to a more favorable rate and terms before this occurs. If a card holder cancels the account then the company cannot raise the interest rate for the remaining balance due.
Some of the features of the CARD Act include:
Billing statements must be mailed 21 days before due date
The Company cannot raise interest rate in first year
Restricts interest rate increase on existing balance
Increase in notice time for rate increase on future purchases
Requires fair application of payments
Provides for fair due dates and time to pay
Protects young consumers
Restricts fees on fee harvester card
Requires enhanced disclosure
Limits were placed on fees and penalties
Requires credit card company to review rate increase every six months
Establishes Gift Card protections
In order to protect consumer from unfair practices on interest rates on remaining balances the Act specifically prohibits “Double Cycle Billing”. This occurs when the credit card company uses balance owed from a previous billing cycle to calculate interest on the current billing cycle. Payments with more than the minimum amount due will apply overage to account with highest interest rate.
Interest rates on remaining balances can be raised under certain circumstances. For Example, card holder is 60 days past due. The Company can send notice of interest rate change. This interest rate hike will terminate in 6 months if all payments are made on time.
In order to further protect the consumer the Company is now required to
Keep the same due date
Credit payments received through 5:00 pm the day they were received
Payments due on weekends must be credited on next business day
Restricts fees for online payment, telephone payment, payments made by mail or any other means
No over limit fees without notification to card holder
Only charge one fee for over limit accounts per billing cycle
If fees on account exceed 25% of the balance due the Company cannot deduct fees from available credit line
Review of account cannot result in a rate increase if payments were on time for past 6 months
Credit card company must give 45 day notice before raising interest rate allowing card holder time to refinance credit card.
Interest rates that are used for promotional purposes cannot be raised after promotional period is over without proper 45 day notice. With Variable interest rate credit cards the credit card company can raise the rate with 45 days notice.
The Act has provisions for those under 21 years of age. Card issuers cannot send offers to people under age 21. Anyone under age 21 requires a co signer. Companies can no longer offer freebies on college campuses to attract students. The company must secure written permission from co-signer to raise credit limit. Companies offering Gift Cards cannot charge fees for cards not immediately used and the gift card must have a 5 year life span.
Credit card companies have been put on notice that they are no longer allowed to use unfair practices to attract consumers and in raising interest rates.
Kelly Bichard writes about personal finance and debt and how it affects you. Visit her website at http://www.InfoStation4U.com
