New Credit Card Law-Get The Facts

CREDIT CARD ACT OF 2009

Most provisions of the credit card act are slated to take effect in February, 2010. The purpose of this act is to provide consumers with some extra protection from sneaky credit card companies practices. Following is a summary of the more important provisions:

Effective August 20, 2009:

Timely Payments:

Monthly statements must be mailed or delivered to the card holder not less than 21 days before the due date of the monthly payment. If the account provides a grace period in which the account can be paid off without incurring finance charges, than the statement must be mailed or delivered at least 21 days before the finance charges are to be added to the account.

Advance Notice of Changes to Credit Card Agreement:

A creditor is required to provide advance written notice to the card holder of interest rate and fee increases or any other substantial changes in the credit card agreement not later than 45 days prior to the changes taking effect. Creditor must include a notice to credit card holder of the right to cancel the account.

Effective February 22, 2010:

Application of Card Payments:

Monthly payment amounts made by the cardholder that exceed the minimum payment due must first be apply to the balance with the highest interest rate, and then to each successive balance bearing the next highest interest rate, until the payment is exhausted.

If the creditor changes its mailing address or procedures for credit card payments, and these changes causes a delay in crediting the cardholder account, the creditor cannot charge late fees during the 60 days following these changes.

Double Cycle Billing:

Creditors are prohibited from adding finance charges for previous billing cycles except where there is an adjustment to a finance charge as a result of resolving of a disputed purchase or an adjustment to a finance charge  for return of a check for insufficient funds.

Over The Limit Transaction Fees:

If the credit card issuer charges fees for transactions that exceed the credit card limits, the credit cardholder must be given the opportunity in advance to approve the over-limit fees (opting-in). If the cardholder opts-in the amount of the fees must be disclosed and the cardholder must have the right to cancel at anytime. Opting-in or cancellation may be made either orally, electronically or in writing.

Due Dates For Credit Card Accounts:

The payment due date must be the same date each month. If the payment due date is a week-end or holiday and the creditor does not receive payments by mail on those days than the creditor must extend the due date to the next business day and not charge any late fees.

Late Payment Disclosure:

If a credit card account imposes a late fee for failure to make the payment on or before the due date the billing statement must include the date on which the payment is due and if the penalty date is different, the date on which the late fee will be charged along with the amount of the late fee.

Pay to Pay:

Creditors may not charge credit cardholders additional fees to pay their bills by mail, electronic transfer, telephone or other methods, unless the cardholder request expedited payment (such as last-minute payment to avoid late fees).

Subprime Cards:

Creditor cannot charge more than 25 percent of the credit card limit in upfront fees during the first year the account is open except fees related to late payment, over-the-limit fee or fee for return check for insufficient funds.

Interest Rate Increases:

Interest rate increases on existing balances is not permitted, except when:

• When an introductory “teaser rate” period ends.

• The credit cardholder is more than 60 days late in making a payment.

• The interest rate is tied to an index and is variable (not fixed).

• The cardholder completes a workout plan for repayment or fails to complete the work-

out plan.

Payoff Timing Disclosures:

Creditor must provide a written statement entitled, “ Minimum Payment Warning”. This statement shall tell the credit cardholder that the minimum payment will increase the amount of interest and time it will take to pay-off the debt with no additional charges being made. The pay-off time shall include the number of months and the amount of principal and interest that will be paid.

Additionally, the creditor shall provide information on the amount of payment required each month to pay-off the debt without any additional charges within 36 months including interest and principal.

Posting Credit Card Agreement On-line:

Creditors must post credit card agreement on the internet.

Penalty Interest Rates:

Creditor must disclose whether interest rates will increase if the cardholder is one or more payments late and the amount of the penalty rate increase. This notice must appear on the monthly statement near the payment due date.

Free Credit Reports:

Companies that advertise “free credit reports” are required to include a statement that consumers may under Federal law obtain a free credit report at ‘AnnualCreditReport.com’ from each credit bureau every year.

Ability To Repay:

Credit card companies must not open a new account or increase the credit limits of an existing account without first determining the borrower’s ability to repay. The company must consider income, assets and review the credit report in deciding whether to grant credit. The company must also consider whether the cardholder has maxed out their credit limits and are making only the minimum payments per month.

Protection of Young Consumers:

Under Age 21:

Prohibits issuing of credit cards to people under the age of 21, unless they have an adult co-signer who has attained the age of 21 or independent submission of financial information that shows their ability to repay.

College Students Under Age 21:

Students under the age of 21 must get the permission in writing of the adult who is jointly liable on the account to increase credit limits. The law bans offers of any tangible items to induce the student to open an account if the student signs up on or near the campus or at an event sponsored by the school.

August 22, 2010:

Gift Cards:

Prepaid gift cards and certificates cannot expire in less than five years of activation unless the terms of the expiration are clearly disclosed. No inactivity fees or service fees are permitted unless there has been inactivity in a 12 month period and all fees to be charged are clearly disclosed prior to purchase. Fee charges are limited to one per month.