New Credit Card Restrictions Protect Cardholders

August 24, 2009, WASHINGTON, D.C. – The first provisions of the bipartisan Credit Card Accountability Responsibility and Disclosure (CARD) Act went into effect last week.  As part of a series of reforms to the financial system, the provisions enacted on August 20 will help protect consumers from excessive credit card fees, retroactive interest rate hikes and unfair, and often incomprehensible, agreement contracts that credit card companies have been able to revise without reason.
 
“As countless people in Tennessee and across our country struggle with the current recession,” said Congressman Bart Gordon, “this law will ensure cardholders keep more of their money and protect them from confusing business practices used by many credit card companies.”

Starting August 20, the following provisions went into effect:

• Credit card companies must provide written notice to consumers at least 45 days in advance of any increases in the interest rate or other significant changes in the terms of a credit card account.

• Credit card companies must inform consumers of their right to cancel the card before rate hikes go into effect.

• Credit card companies must send statements to consumers 21 days before the due date of any payments.

“The most important thing this law will do is ensure cardholders have the information they need to make educated decisions about their finances,” explained Gordon.  “This law will prohibit card companies from hiding important information in the fine print of the contracts."

In February 2010, many of the new law’s remaining provisions will go into effect, including prohibiting card companies from raising interest rates on existing balances unless the cardholder has not paid the minimum balance 60 days after the due date.  Card companies will also not be able to raise interest rates in the first year after a card is issued unless specified in the contract, and consumers under the age of 21 will be required to have a cosigner and have restricted credit limits.
  
The new credit card restrictions are a result the Credit CARD Act which was signed into law on May 22.  The bill’s provisions were developed after the Federal Reserve examined common business practices employed by credit card companies and determined many were “unfair,” “deceptive,” and “anti-competitive.”