Newsletters 2009 Newsletters Credit CARD Act of 2009 (8/7)
Friday, 07 August 2009 22:25
On May 22nd, 2009 President Barack Obama signed into law the Credit Card Accountability Responsibility and Disclosure (Credit CARD) Act of 2009 enacting some of the most sweeping credit card reform in over 40 years in efforts to protect the millions of American consumers that rely on credit.
The act, scheduled to take effect in February 2010, is meant to protect consumers from the more deceitful practices of credit card companies, such as credit card fine print, fees, and staggering interest rate hikes. While there is no greater protection than personal accountability and conscientious spending and credit card habits, the newly enacted credit card law holds in store some of the following for cardholders:
The way credit card payments are applied to balances
Currently, card issuers are able to apply your payment, after interest and minimum payment are met, to the debt with the lowest interest rate, thus extending the period of time it takes to pay off the balances with the higher rates. The new law states that any monthly payment made in excess of the minimum balance due must be applied to the balances with the highest interest rate first, then to the next balances with the highest interest rate and so on.
Interest Rate Increases
Retroactive interest rate hikes on existing balances will now be banned, except under limited conditions. Every six months, the card issuer must conduct reviews of accounts in which interest rates have been increased based on market conditions, the creditworthiness of the card user or other factors. If those factors have changed, card issuers must, if warranted, reduce the interest rate.
Universal default, the practice of raising card users' interest rates based on their payment records with unrelated accounts, such as utilities or other credit cards, is banned.
Age requirements for credit cards
Currently, anyone over the age of 18 can apply for a credit card without a co-signer. The new law will require a co-signer for anyone under the age of 21, unless they can prove that they are employed and able to make payments on a credit card. Pre-screened credit card offers will not be allowed to be sent to anyone under the age of 21.
Over the limit fees
Cardholders will now have to “opt in” to over-limit fees. The current card issuer practice is to let consumers keep charging, even if they’re over their limit. They are then assessed an over limit fee for each transaction, which is added to their balance along with interest accruing. For those who choose not to “opt in” in their credit card agreement, all transactions will be rejected if they exceed their available credit limits and over-limit fees are thus avoided.
Notice of changes to credit card agreements
Credit card companies will now be required to give 45 days notice prior to making any changes in interest rates, rewards programs and other credit card agreement terms. Currently, issuers are able to change terms at anytime without notice or reason.
Minimum payments
Card issuers now must disclose to card holders the amount of time it will take to pay off the entire balance in full if making only the minimum payment required each month. In addition, the companies will have to tell the consumer how much they will pay in total including interest and also provide information on how much the user must pay each month if they want to pay off their balances within 12, 24 or 36 months, including the amount of interest.
Online Agreements
All creditors are now required to post credit card agreements on the internet and submit electronic copies to the Federal Reserve Board.
Timely Payments, Pay to Pay and Due Dates
Credit card issuers will now have to mail or deliver monthly statements to credit card users at least 21 days prior to the due dates (as opposed to the previous 14 day window). In addition, due dates for monthly payments are required to fall on the same date each month. Due dates that fall on weekends or holidays must have payments credited to the account on the next business day without late fees.
Card issuers will no longer be able to charge customers additional fees to pay their bills by mail, electronic transfer, telephone or other methods, unless the customer requested expedited payment.
Double Cycle Billing
Finance charges on outstanding balances will now be computed based on purchases made during the current cycle rather than going back to the previous billing cycle to calculate interest charges (unless there is a disputed purchase adjustment or payment returned).
The above are just a few highlights that the newly enacted Credit CARD Act of 2009 entails. Due to the fact that these laws will not come into effect for six more months, we recommend you pay extra close attention to your credit cards during this period. Keep an eye out for interest rate hikes, loss in the value of your rewards points, or even the addition of annual fees to participate in some rewards programs. Consider the affect this new legislation will have on you and remember, it is always smart to carefully read everything you get from your credit card issuers, especially in the coming months.
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