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Credit CARD Act of 2009: A Summary

Posted on May 25, 2009 by Tom Fragala

On May 22, 2009 the President signed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009. This law was designed to substantially increase protections for consumers, while many on the card issuer and bank side have said it will lead to higher fees and lower rewards. Many of the most disliked credit card policies were abolished with this law. One of the biggest is the ban on rate increases for universal default.

Here is a summary:

• No more retroactive rate increases on existing balances for "any time, any reason" or "universal default" (rate increases when you miss a payment on another, different credit card)
• Severely restricts retroactive rate increases due to late payment.
• Contract terms must be clearly spelled out and stable for the entirety of the first year.  Promotional rates must be clearly disclosed and last at least 6 months.
• Consumers get at least 21 calendar days from time of mailing to pay their monthly bill.
• Prohibits late fee traps such as weekend deadlines, due dates that change each month, and deadlines that fall in the middle of the day (now it's always 5pm on due date).
• Credit card companies required to apply excess payments to the highest interest balance first
• Ends the confusing and unfair practice by which issuers use the balance in a previous month to calculate interest charges on the current month, so called "double-cycle" billing.
• Card issuers must obtain a consumer’s permission to process transactions that would place the account over the limit.
• Fees on subprime, low-limit credit cards will be substantially restricted.
• Requires disclosure on fees for gift and stored value cards
• Restricts inactivity fees unless a gift card has been inactive for at least 12 months.
• Gift cards cannot expire in less than 5 years.
• Creditors will give consumers clear disclosures of account terms before consumers open an account, and clear statements of the activity on consumers’ accounts afterwards.
• Card issuers must display on periodic statements how long it would take to pay off the existing balance and the total interest cost if the consumer paid only the minimum due.
• Card issuers must display payment amount and total interest cost to pay off the existing balance in 36 months.
• Card issuers must make contracts available on the Internet.
• Higher penalties if card issuers violate the law.

I haven't read the entire law. There are a couple interesting things tacked on. One has to do with the right for licensed gun owners to carry a gun in a national park. The other is Section 603 which appears to allow the FDIC and NCUA to borrow more funds, from $30 billion to $100 billion; not sure what that's about but I assume it has to do with allowing them to save more failing financial institutions.

Read up on the bill (S.414 and H.R. 627) at the Library of Congress.