Overview Of The Credit CARD ActThe Credit CARD (Card Accountability, Responsibility and Disclosure) Act was signed into law by President Barack Obama on May 22, 2009. This act was put into place as a means to help protect consumers from predatory lending practices set forth by credit card companies.
The act was put into effect on February 22, 2010. The main purpose of the act was to establish a “Credit Card Holder’s Bill of Rights”. A summary of the most important parts of the bill is presented below.
No More Random Interest Rate Hikes: Card companies must notify customers in writing at least 45 days in advance of any increases in the interest rate. They must also give the customer the chance to cancel the card and pay off the balance before the new interest rate takes effect. A total of three billing cycles after the rate increase must be given to the customer to say no to the terms.
No More Universal Default Rate Increases: Card companies can no longer increase interest rates on existing balances of a cardholder that is in good standing with their company because of behavior on another card.
No More Contract Changes: Card companies can no longer practice “any time any reason re-pricing”.
No More Double Cycle Billing: Interest cannot be charged on debt that is paid during a grace period.
No More Fees On Interest Only: Card companies can no longer charge fees on the interest only portion of a balance when the bill is paid on time.
No More High Interest For Good Customers: Customers who had experienced a rate increase but have paid their bill on time for six months in a row must be allowed to have their interest rate returned to the rate it was prior to the increase. Creditors must review customer payment history to make these changes.
No More Due Date Tricks: Customers must be given ample time to pay their bills. Bills must be mailed at least 21 days prior to the due date, and any payment made before 5pm on the due date is to be considered on time.
Bills must be due on the same date each and every month, unless it falls on a Saturday, Sunday, or bank holiday, in which case it will be the next available business day. Customers must also be allowed to pay by mail, phone, or internet. Cardholders cannot be charged late fees when they can prove they mailed payment at least seven days prior to the due date of the statement.
No More Breaking Up Payments: Card payments must now be applied to the debt that is carrying the highest rate of interest before any other debt. For example cash advances typically come with higher interest rates, so payment must apply to them first.
Card companies had been applying payments to the lowest interest rate balances before any other. Minimum payments will still cover the lowest interest rate first; however any extra amount over the minimum must be directly applied to higher rate debt.
