One of the key achievements of the 111th Congress has been the enactment of the Credit CARD Act – or the “Credit Cardholders’ Bill of Rights” – which President Obama signed into law on May 22, 2009 (PL 111-24).

This key legislation is designed to hold credit card companies accountable and provides tough new protections for consumers – banning unfair rate increases and forbidding abusive fees and penalties by credit card companies.

The Credit CARD Act contains three separate implementation dates, 90 days, 9 months and 15 months after enactment – but most of the key reforms, as can be seen below, go into effect 90 days after enactment – or Monday, February 22, 2010. These key reforms include prohibiting arbitrary interest rate increases and prohibiting interest charges on debt paid on time (double-cycle billing ban). 

>> Read H.R. 627, the Credit Card Act of 2009

Implementation Dates

The CARD Act contains three separate implementation dates, 90 days, 9 months and 15 months after enactment. The break-out below lists when provisions become effective.

Effective August 20, 2009

• Provide increased written notice to consumers of any increases in the interest rate or otherwise makes a significant change to the terms of a credit card account;
• Inform consumers of their right to cancel the card before the rate hike goes into effect;
• Send statements to consumers 21 days before the due date of any payments.

Effective Monday, February 22, 2010

• Prohibits arbitrary interest rate increases and universal default on existing balances;
• Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions, and also limits over-limit fees on electing cardholders;
• Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
• Prohibits issuers from setting early morning deadlines for credit card payments;
• Prohibits interest charges on debt paid on time (double-cycle billing ban);
• Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;
• Protects recipients of gift cards by requiring the Federal Reserve to issue rules that all gift cards to have at least a five-year life span, and eliminate the practice of declining values and hidden fees for those cards not used within a reasonable period of time.

Effective August 22, 2010

• Requires penalty fees to be reasonable and proportional to the omission or violation.
• Requires that creditors periodically review all interest rate increases since January 2009 and reduce rates when a review indicates that a reduction is warranted.
• Amends the Electronic Fund Transfer Act to limit dormancy, inactivity, and service fees associated with gift cards.

Related Links:

Q & A about the Credit CARD Act, H.R. 627

Board of Governors of the Federal Reserve System: "What You Need to Know: New Credit Card Rules"