The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (also known as the Credit CARD Act) established sweeping changes intended to help limit deceptive marketing of practices, excessive credit card fees, and hefty interest rate increases.  Starting in 2010, certain corporations will be required to make more disclosures and they face new limits on certain credit card practices.

Every person is entitled to a free credit report every 12 months from each of the four nationwide financial consumer reporting agencies Equifax, Experian, Innovis, and TransUnion.  By Feb. 22, 2010, the Federal Trade Commission must formalize the rules governing this access to prevent deceptive marketing of the credit reports.

The FTC has one proposal that would prohibit the credit bureaus from offering any product or service until after consumers get their free reports.  The law currently permits the credit reporting agencies to advertise their proprietary products and services through the centralized source, in this case AnnualCreditReport.com.

Regulations relating to interest rate increases, over-the-limit transactions, and the marketing of credit cards to college students become effective Feb. 22, 2010.  For example, Michelle Singletary of the Washington Post reports that credit card issuers will not be able to increase interest rates on existing balances unless a cardholder is at least 60 days late paying the bill.  The White House Press Release notes that credit card issuers can’t impose over-the-limit fees unless a consumer has given the company permission to accept transactions that go over his or her credit limit.

To learn more, read The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (also known as the Credit CARD Act).  Additional excerpts from the CARD Act include the following:

  • Credit card rates can’t be increased on outstanding balances — except for the increase that happens when a 0% or other low interest introductory rate expires on newly-issued cards or when a customer is 60 days late on a payment.
  • If a customer is 60 days late on a payment and an interest rate is increased, the issuer must dial the rate back to the original level if the customer pays the past-due payments and makes 6 straight months of on-time minimum payments.
  • Card rates can not be increased in the first year of a card agreement (unless there is a limited-time low-interest introductory rate as part of the original card offer).
  • Low-interest introductory rate offers must last at least 6 months.
  • Customer payments must be applied to higher-interest balances first.
  • If a card is marketed as “fixed rate,” the card issuer must reveal exactly how long the rate is guaranteed to remain the same.
  • Credit card issuers can not use “double-cycle billing,” a practice that allowed issuers to charge interest based on the average balance from the past two months, even if last month’s balance was paid.
  • Payment due dates must be the same each month. If a due date falls on a weekend or holiday, the due date must change to the following business day.
  • Issuers can’t charge fees for payments by certain methods. For example, issuers can not charge customers more if they pay by phone than if they pay online.
  • Issuers can’t allow customers to go over their credit limits and then charge “over the limit fees” unless the customer has first “opted in” — specifically asking for the service.
  • Issuers must include a place on the bill that shows customers how long it would take to pay off their balances if only the minimum required payment was paid each month.
  • Issuers may not charge upfront fees that are greater than 25% of a card’s credit limit.
  • Issuers may not issue cards to people under 21, unless the customer has proof of income or has a co-signer who accepts responsibility for the card.

In other changes starting in February 2010, if your credit card due date falls on a weekend or holiday, issuers can’t penalize you for being late if the payment comes in the next business day.  Additionally, payments received by 5 p.m. must be credited the same day.  By July 2010, if your interest rate was increased because you were 60 days late on a credit card payment, your issuer will have to revert back to the original rate if you’ve had six months of on-time payments.

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