On May 22, 2009, President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 into law. This new and unprecedented legislation, which will officially go into effect on February 22, 2010, aims to help consumers. Credit card companies have been essentially free to act unethically towards their customers and this new law is designed to stop that. HelpSaveMyDollars.com summarizes the law below and explains what YOU need to know!
- Credit card companies must give the consumer 45 days notice before raising the interest rate on credit cards.
- Credit card companies must also tell you in writing, 45 days before they increase any fees or other charges and/or if the creditors wish to change the terms of your credit card agreement. When the credit card companies contact you regarding the above items, they must write in an understandable and concise manner and tell you that you have the ability to cancel your credit card.
- If you (the consumer) wish to close down your credit card, the credit card companies should not consider that a default on the existing balance and this should not cause the creditors to charge you a fee or penalty nor should the creditors force you to pay back any existing balance at that time.
- Creditors can increase interest rates or fees if:
- a special promotion (that the consumer has been previously informed about) has ended.
- the consumer has not paid their credit card bill within 30 days after the due date of the bill.
- a hardship agreement between the creditor and the consumer has expired.
- 6 months after the credit card companies have raised your interest rate, they must review your situation and return the interest rate to the level before the raise if you’ve consistently paid your credit card bill on time.
- Credit card companies cannot increase interest rates until 12 months have passed since the account was originally opened. (for cards with a special promotional interest rate, credit card companies can’t increase rates until 6 months after that card has been opened).
- Double billing cycle and universal default are no longer permitted
- Double-cycle billing is as follows: Let’s say in June you had $1,000 in credit card debt, but in July you paid that debt down to $500. Double-cycle billing would enable credit card companies to charge you interest as if the balance was $750, or the average of two billing cycles in a row.
- Universal default would allow the creditors to raise your interest rates if you defaulted on another, completely non-related bill, such as a cell phone bill or a student loan. Both of these practices are no longer allowed as of February 22, 2010!
- Over credit limit fees and penalties are no longer permitted, unless the consumer wants the transaction to occur as opposed to it being canceled since the consumer is over their credit limit.
- Creditors must send out the bill 21 days before the due date.
- If you send in the payment on the due date before 5 pm, that must be considered “on-time”.
ENHANCED CONSUMER DISCLOSURES:
- Credit card companies must tell you how long it will take you to get out of credit card debt if you only pay the minimum payment.
- Creditors must disclose the total interest and principal costs of paying only the minimum payment.
- The late payment deadline must be disclosed in a visible manner.
- The credit card agreement must be posted on the Internet.
PROTECTION OF YOUNG CONSUMERS:
- Those under age 21 who want credit cards must have a co-signer on the account. A co-signer could be a parent, legal guardian or anyone over age 21 who is capable of paying off the credit card should the consumer under age 21 fail to do so.
- Parents must give consent in order for credit limits to be increased, if that parent is a co-signer.
- Credit card companies are no longer allowed to provide incentives (such as a free t-shirt or a free calculator) for students to sign up for credit cards on or close to college campus.
- Dormancy fees (fees charged if the gift card is not used for a certain period of time) will no longer be allowed, unless the gift card has not been used within a 12 month time frame.
- Gift cards cannot expire until after they have been opened for 5 years.
This is the bulk of the Credit CARD Act of 2009. Some provisions have already gone into effect as of August 20, 2009 (such as the 45 days notice before credit cards can raise interest rates).