How do the New Credit Card Laws Affect You?
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LOAN AND DEBT
President Obama signed the Credit Card Accountability, Responsibility, and
Disclosure (CARD) Act of 2009 into law on May 22, 2009. It took effect on
Feburary 22, 2010. This new law was fast tracked through congress, only
being introduced on Feb 11th by Senator Chris Dodd. Just what do these
new credit card laws do, and how will they protect you and other consumers
with credit cards?
If you have one of the roughly 1 billion credit cards floating around the
United States (source - Visa and Master Card Int'l.) this new legislation will
lay down the law on what credit card companies can do to you and what they
are now prohibited from doing. Some of the practices on the "don't" list have
been standard industry procedure for quite some time now.
One effect of the new laws is the changing of the Truth in Lending Act so
companies must give car holders advance notice of any increase in the
annual percentage rate of interest (APR) pertaining to a credit card account
under an open end consumer credit plan.
The Act also ups criminal and civil penalties for credit card issuers who fail to
comply with the new laws.
The new credit card law also prohibits the time honored industry practices of:
*Universal default (except in certain circumstances) and unilateral changes
to cardholder agreements. Universal default is the process whereby a credit
card company can raise your rates because you defaulted on a different
company's credit card. As can be imagined, this practice is universally
reviled by consumers.
*Creditors giving information to a consumer credit reporting agency
regarding a newly opened credit card account before the credit card has
been used or activated by the consumer.
*Raising rates on cancelled cards. Now, once a credit card has been
cancelled, the interest rate can not be raised on the outstanding balance.
*Sending pre-approved credit card offers to people under 21 years of age.
Now a consumer must specifically request a credit card when under 21. This
will change the way credit cards are marketed, especially on college
The act also limits or prohibits other credit card industry activities, such as:
*Failing to report prompt payments in a timely manner.
*Sending out bills to car holders such that they arrive when they are too late
to be paid on time.
*Charging fees and penalties for on-time payments, or early balance pay
In short, the act restricts many of the practices that the credit card industry
has used to prey upon consumers for years. That is not to imply that credit
card consumers have been blameless. Far from it. Many consumers have
used credit cards irresponsibly, running up large bills they had no hope of
repaying. In many cases the purchases were for non essential items, and
caused by nothing more than a lack of financial discipline. Such spending
patterns are not the credit card company's fault, they rest squarely on the
shoulders of the individual, no matter how the card was marketed.
These new credit card laws may make it more difficult for those individuals to
get their hands on credit cards, because the card issuers have a more
restrictive set of rules to play by. It will be harder for them to recoup losses
on late payments a defaults by imposing fees and higher interest rates. So,
while protecting existing credit card customers, that will make it less likely the
companies will issue cards to new consumers with poor, or even marginal
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