Lance Raphael On WGN: Changes By The Credit CARD Act Of 2009

The Credit Card Accountability Responsibility and Disclosure Act of 2009 made changes regarding how credit card companies handle consumer accounts, such as how and when they can raise your interest rates, impose over-the-limit fees, and open credit card accounts with persons under 21 years old. Some of these changes include:

No more unfair and unexpected interest rate increases

A credit card company cannot raise rates unless:

• A promotional rate has expired (minimum promotional rate is 6 months)
• Consumer cardholder paid late by sixty days or more:
  If this happens, the credit card company must clearly and conspicuously notify the consumer of the reason for the increase, and that the increase will terminate no later than 6 months after it is imposed if the consumer timely makes the minimum payments for six months consecutively.
  No more universal default – credit card issuers cannot retroactively increase interest rates on the existing balance of a cardholder in good standing for reasons unrelated to the cardholder’s behavior with that card
• However, a credit card company can raise rates at any time with a 45-day advanced notice:
  The notice is required to be made in clear and conspicuous manner, and should advise the creditor of their right to cancel account
  • If the consumer cancels, it shall not constitute a default, it shall not require him or her to immediately repay the debt in full, but can require the consumer to repay in one of two methods:
    Amortization period of not less than 5 years, beginning on the effective date of the purported rate increase; or
    A required minimum payment that includes a percentage of the outstanding balance that is not more than twice the percentage required before the interest rate increase
• Cannot raise interest rate within first 12 months of the credit card subject to limited exceptions (i.e promotional rate expired, it was explained that it would increase in the agreement, temporary hardship agreement failed, failure to make minimum payment for 60 days)
• The credit card agreement provides for a variable interest rate that is not under creditor’s control
• Such an increase is due to the completion of a workout or temporary hardship arrangement by the consumer or his or her failure to comply with the terms of that arrangement:
  In this case, the credit card company can’t impose an interest rate on transactions that occurred prior to the workout at a higher rate
  And the creditor needs to disclose clearly and conspicuously the terms of such arrangement

No more nickel and diming fees

• Credit card companies cannot charge a fee to pay a credit card, whether by mail, telephone, or electronic transfer
  Unless such payment involves an expedited service by a service representative of the credit card company
• No more over-the-limit fees, unless consumer “opts-in” to let a credit card company complete over-the-limit transactions
  If you opt-in to complete over the limit transactions, you can’t be charged: 1) more than one over-the-limit fee per billing cycle and 2) only once in each of the 2 subsequent billing cycles, unless the consumer makes an additional charge that causes the card to go over the limit
  If consumer does not opt-in, he can’t be charged an over the limit fee if the credit card allows the over-the-limit transaction
• Any penalty imposed is required to be reasonable and proportional to the violation of credit card terms
• Subprime credit cards can no longer charge up to the cardholder’s credit limit with fees
  The law requires that fees for subprime cards not exceed 25% of the credit limit in the first year.

No more billing date confusion

• Credit card company must mail statements at least 21 days before payment due date
• Payments must be credited as timely if received by 5 p.m. on the due date
• All due dates that occur on weekends or holidays are extended to the next business day if the creditor does not process payments on those days

Credit card companies cannot hide the reality of making minimum payments only

• Must clearly disclose on the billing statement how long it would take to pay off a credit card balance if the cardholder makes only the minimum payments
• Must clearly disclose on the billing statement the total cost of interest and principal payments if a cardholder makes only the minimum each payment each month

No more preying on minors

• Credit cards can no longer be issued to persons under 21 unless they have an adult co-signer or prove payment ability
• College students must get permission from adult cosigner to increase credit limit on joint accounts
• Individuals under 12 will not get pre-screened credit card offers unless they specifically opt-in to receive them

View the entire CREDIT CARD ACCOUNTABILITY RESPONSIBILITY AND DISCLOSURE ACT OF 2009 (pdf document)