The CARD Act
In 2009 the Federal Government signed into law the Credit Card Accountability, Responsibility and Disclosure Act, or Credit CARD Act. This law was aimed at improving the industry for consumers and stopping the overall abusive practices of the credit card business. In 2011, the Consumer Financial Protection Bureau (“CFPB”), the agency in charge of consumer protection in the financial marketplace, was appointed to monitor the Act and ensure compliance. Over the past four years, the CFPB has regulated the industry and this past month, the agency released its second report showing how since its enactment, the CFPB believes the statute has helped to save consumers more than $16 billion in credit card fees.
The statue sets out eight rules required for credit card companies to follow:
1. The statute prohibits retroactive rate increases.
Prior to 2009, credit card companies could raise rates on a whim, even on a previous accrued, unpaid balance. The statute sets out rules that allow a credit card company to raise rates but only on balances accrued after the date the increase is announced.
2. The act must provide ample notice of a rate increases.
In the past, credit card companies were only required to provide a consumer with notice of a rate increase 15 days before the increase was put into effect, the new law ordered a 45 day notice period. This notice allowed a consumer more time to decide whether or not to continue using the card or to look for a new card with a lower rate.
3. The CARD Act restricts additional charges on payments.
Simply put, a credit card company cannot charge fees to a consumer for making payment on their debt. Previously credit card companies would charge a consumer a small fee for making payment by phone or internet. This conduct is no longer permitted.
4. Credit card companies must give consumers more time to pay.
Credit card companies must send a monthly bill at least 21 days before the bill is due, giving a consumer ample time to make a timely payment.
5. The Act only permits a single cycle billing period.
Prior to 2009, credit card companies were permitted to have a double cycle billing period, which would allow them to collect late fees for missed payments twice in one month. The new law prohibits this and restricts the billing period to once per month.
6. The Act restricts issuing card to minors with exception.
Consumers under 21 years of age will no longer be approved for a credit card without an adult co-signor or proof of income. The purpose of this law is to protect young adults from being taken advantage of and falling into credit card debt at a young age.
7. Payment distribution must be made to balances with higher interest rates.
Previously, any payment made on a debt could be allocated to that portion of the debt carrying the lowest interest rate. You may have puirchased items at a time when the rate was higher. The new law requires that payment first be applied to tha balance that carries your highest interest rate, making it easier for a consumer to pay off a balance.
8. Preserving gift cards
As of 2009, gift cards cannot expire for at least 5 years from the date of issuance and cannot charge fees on an inactive card for at least one year.
If you are in need of additional information regarding the CARD Act and would like to speak with an attorney, contact SmithMarco P.C. for a completely free case review.