New Credit Card Law

September 1, 2009 -- Credit Cards: New Law Protects Consumers from Surprise Fees, Rate Increases and Other Penalties

In May, Congress passed and President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 — the Credit CARD Act — the most sweeping statutory changes in card protections for consumers since the Truth in Lending Act was enacted in 1968. The new law is intended to help protect consumers from abusive fees, penalties, interest rate increases and other unwarranted changes in account terms.

While the law generally will take effect on February 22, 2010, some important changes went into effect on August 20, 2009, and others not until August 22, 2010. Here's a look at key provisions.

Prohibitions and restrictions on rate increases: Starting on February 22, 2010, card issuers generally can't increase the Annual Percentage Rate or APR (the cost of credit expressed as a yearly rate, including interest and other charges) on existing balances for one year after the account is opened. There are a few exceptions to this rule, and additional provisions related to rate increases.

New limits on fees and interest charges: One of the most important changes requires that monthly statements be mailed or delivered at least 21 days before the payment due date, an increase from 14 days. This provision of the law took effect August 20, 2009, and applies to all open-end credit, including credit cards and home equity lines of credit.

Improved disclosures: Also starting on February 22, 2010, credit card issuers must provide new, clearer and more timely disclosures of account terms and costs — before and after an account is opened. This will help consumers choose the right card, shop for better deals and avoid mistakes.

Monthly credit card statements will be changing significantly. Card statements must include a box showing cardholders how much they have paid in interest and in fees during the current year. Statements also will include details warning consumers about the high costs of making only the minimum payment.

Other changes worth noting:

• Fair deadlines for credit card payments: Starting on February 22, 2010, the due date for card payments must be the same day each month.
• Restrictions on penalties for going over the credit limit: Effective February 22, 2010, no fees may be imposed for making a purchase or other transaction that would put the account over its credit limit unless the cardholder "opts in" (agrees) for the credit card company to process over-the-limit transactions and charge a fee.
• Protections for young consumers: Also as of February 22, 2010, companies will be prohibited from issuing a credit card to a consumer younger than 21 unless he or she submits a written application that includes the signature of a co-signer over 21 or information indicating the young consumer has independent means to repay the card debt.

Final Thoughts

While the new law will prohibit certain practices and provide more timely disclosures of account terms and costs, consumers still need to do their part to better manage their credit cards. "Start by understanding the terms of a credit card before signing up for it," said Susan Boenau, Chief of the FDIC's Consumer Affairs Section. "Also, closely review your credit card bill each month, and monitor and understand the disclosures and account changes communicated by your card company."

Read this article in it's entirety on the FDIC website.