On May 22, 2009 the Credit Card Accountability Responsibility and Disclosure (CARD) Act was signed into law after the public’s response to many credit card practices. Some of the provisions have gone into effect and others will be implemented in the coming months.
Below are highlights of the legislation.
Payments
• Minimum Payments—Payments above the minimum must be applied to highest-interest rate balances. If the creditor has balances with interest rates, the new rules require banks to allocate anything over the minimum payment to their highest interest rate balance.
• Location Payments—No fees can be charged to those cardholders making their credit card payment online, by mail or over the phone, unless the payment is made over the phone and the bill is due the same day or next.
• Due Date—Payments are due on the same day each month.
Billing Statements
• Due Dates—Billing statements must be sent 21 days before the due date and mailed credit card payments can be received by 5 p.m. on the due date to be considered on time.
• Payment Processing—Payments are considered on time when received the next business day after a holiday or weekend and payments made at local branch should be credited that same day.
• Minimum payments—Billing statements must include a sentence stating that paying on the minimum increases interest paid and time to pay off the balance.
• Pay Off Information—Billing statements should be sent at least quarterly and include:
o The number of months it will take to pay off your balance making minimum only payments.
o The total cost of making minimum-only payments.
o Monthly payment necessary to pay off the balance in one, two, or three years.
o A toll-free number to call for credit counseling and debt management.
Finance Charges
• Double Cycle Billing—Credit card issuers are prohibited from calculating finance charges using double cycle billing which cause card holders to pay interest on previously paid balances.
Over-the-Limit Fees
• Opt-in—No over-the-limit fees unless the cardholder requests the issuer to process over-the-limit transactions. If not, the over-the-limit transactions will be denied and the cardholder will incur a fee.
• Billing Cycle—Cardholders cannot receive more than one charge for exceeding their credit limit in any billing cycle.
• Transactions—Cardholders can only be charged one over-the-limit fee per transaction. Even if the cardholder’s balance remains over the limit for the next billing cycle, the cardholder will not be charged a credit limit fee, unless an additional transaction which pushes the balance over the limit.
• Holds—No over-the-limit fees can be charged to a cardholder if they have a hold, such as a car rental, that places them over the limit.
Interest Rates
• First-Year Rates—Interest rates cannot increase during the first 12 months of opening a credit card, unless the rate increase was disclosed when you first opened the credit card.
• Promotional Rates—Promotional rates must last at least six months.
• Pre-Existing Balances—No interest rate increase on pre-existing balances. If the credit card issuer decides to increase your interest rate, that new rate would apply to new balances. The current balance would continue to be subject to the old interest rate. However, an exception to the rule exists for those that are more than 60 days late on their credit card payments.
• 45-Day Advance Notice—Credit card issuers must give a 45-day advance notice before increasing interest rates or making major changes to credit card agreements.
• Minimum Payments—Interest rates can increase if minimum payments are not made within 30 days of the due date.
• Review of Rates—Increase rates must be reviewed and decreased if the review shows change. Credit card issuers can no longer increase interest rates to the default rate and leave it there if cardholders have improved their payment habits.
Credit Report
• New accounts—Credit reports must remove new credit accounts from their report if the account is never used or activated, or closed within 45 days.
• Inquiries—Credit card solicitation should include information about the effects of too many credit report inquiries. Several credit inquiries can decrease your credit score.
Minors and College Students
• Minors—No credit cards for minors under 18 years old unless they have been emancipated or are authorized users on a parent or guardian’s account.
• College Students—No credit cards for college students who do not have verifiable income or already have an account with a credit issuer. College student’s total available credit should not be more than 30 percent of their annual gross income for the previous year.
Subprime Credit Cards
• Limits—During the first year of a credit card, banks cannot charge fees that exceed 50 percent of the credit limit. Only 25 percent of the fees can be charged when the account is first opened. Any additional fees must be spread over at least five billing cycles.
Disclosures
• Simplified Disclosures—The use of tables and bold text will be used to emphasize key information on credit card disclosures. Credit card issuers will be required to disclose the duration of penalty interest rates, simplify information about variable interest rates and detail when grace periods do and do not apply.
|
