The Credit Card Accountability, Responsibility and Disclosure Act of 2009 officially went into effect on February 22, 2010. The Credit CARD Act was authorized by President Barack Obama in an effort to establish an increase in consumer acknowledgement and prevent several extreme practices within the credit card industry. While the majority of the laws went into effect in February, a handful of these legislations will not go into action until August. This bill carries with it a number of benefits to consumers.


Benefits of the Credit CARD Act


Many of the modifications to go into effect will deliver considerable advantages to consumers by protecting them from unjust credit card industry practices and helping to make terms and interest fees considerably easier to understand. Please note that a few of the provisions of the law will not go into effect until August of this year. Following are just a few of the benefits consumers can expect with the enactment of the Credit CARD Act:


Clarity


•Issuers of credit cards will be required to provide clear disclosure of all credit card account terms before approving a new account to a consumer.


•Credit card companies will be required to include a disclosure explaining minimum payments and the length of time it will take to pay off an existing balance if the account holder pays only the minimum amount due.


•A disclosure regarding minimum payment details and total interest costs within a 3-year time period will also be required.


•Information regarding account terms and account holder agreements will be required to be made available on each credit card company’s individual website



More notice of rate increases and payments due


•Taking effect in August, account statements will be required to be sent out 21 days before the amount is due.


•Notice of interest rate increases and other significant fee changes will increase from 15 days notice to 45 days. This section of the law will also go into effect in August.



No retroactive rate increases


•Also effective in August, credit card companies will not be permitted to raise rates on the existing credit card balance due unless the customer is at least 60 days late on payment. This puts an end to credit card companies increasing rates at any time and for any reason.


•If the account holder exceeds the 60-day late period, but shows at least 6 on-time consecutive payments, the company must lower the interest rate to its previous level.



New fee restrictions


•Companies will be prohibited from increasing rates of interest on new accounts during the first year of activation of the account.


•No over-limit fees are allowed without the prior consent of the credit card holder to accept over-limit transaction fees. No more than one over-limit fee will be permitted per billing cycle. These fees cannot be applied if interest rates and credit card fees are the reason the account holder has exceeded the limit.


•No additional fees or penalties for accepting credit card payments by electronic transfer, phone, or any other means will be allowed except in the case where the payment is made through an alternative service provider.


•When the payment due date on an account falls on a holiday or weekend, the customer can not be penalized for making payment by the next business day.


•Limits will be applied to “fee harvester” credit cards. Any fees beyond over-limit fees, late charges, and insufficient funds fees cannot exceed 25% of the opening credit limit. Any promotional interest rate incentives are required to stay in effect for a minimum of 6 months.



Age and income restrictions


•New regulations prevent credit card companies from taking advantage of college students and young adults who may be just learning to take responsibility for their financial situations.


•A credit card cannot be issued to a person under the age of 21 without proof of sufficient income or a co-signer.



Payment allocations and an end to double-cycle billing


•Any payments made by the credit card holder exceeding the minimum amount due will be required to be applied to the highest interest balance before being credited to lower interest rate balances.


•The act of double-cycle billing, or charging interest on previously paid debts, will be prohibited.



Protection for holders of gift cards


•To go into effect in August, gift cards must be valid for a minimum of 5 years.


•No inactivity fees may be assessed unless the gift card has not been used for a period of at least 1 year.