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Credit CARD Act of 2009

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The The Credit Card Accountability, Responsibility, and Disclosure (CARD), known as Credit CARD Act, is a federal legislation passed to facilitate credit card reform by establishing fair practices and transparency to the extension of credit offered to consumers.

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Contents

Overview

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009[1] was passed on May 22, 2009 and came into effect February 22,2010.[2] It established fair practices and transparency to the extension of credit offered to consumers in an attempt at federal credit card reform in the U.S.

The CARD Act protects consumers by requiring credit card issuers to adhere to stricter disclosure requirements about the terms of the account. It also places limitations on issuers' actual practices.  The Act prevents unfair increases in interest rates and changes in terms; prohibits exorbitant and unnecessary fees; requires fairness in application and timing of card payments; protects the rights of financially responsible credit card users; provides enhanced disclosures of card terms and conditions; strengthens oversight of credit card industry practices; and, promotes financial literacy.[3]

Small businesses were not included in the regulations to protect consumers as there was uncertainity as to how the regulation would affect credit price and availability of credit to small businesses. [4]

Provisions of CARD Act

  • Credit card issuers must give a minimum of 45 days notice to card holders before raising interest rates or making other significant changes in the terms of their credit agreement. This provision went into effect in August 2009 and was created to allow consumers to cancel their before any interest rate increases go into effect on their accounts.[5]
  • If the credit card company instituted a grace period, the CARD requires that the grace period extend to 3 weeks (21 days) after the statement is mailed.
  • Limitations on circumstances under which credit card companies can increase interest rates. [6]
  • Establishing regular practices related to payment due date and processing. For example credit card companies cannot change due dates between billing cycles, leading to late fees and must accept payments received by 5:00pm on the due date, rather than an arbitrary time.
  • No fees for payments made online, by telephone, or by other means. [7]
  • Limitations on solicitation and credit card issuance to individuals under 21 years.
  • Forbids practice of declining value of credit card gift cards and hidden fees for cards not used within a period of time. Gift cards now have a five-year life span.

Criticisms of CARD Act

The CARD Act received criticism for lack of any provisions capping interest rates.

References

  1. http://hdl.loc.gov/loc.uscongress/legislation.111hr627
  2. http://knowledgebase.findlaw.com/kb/2010/Jan/59137.html
  3. http://www.bankcardfinder.com/credit-articles/credit-card-bill-of-rights.html
  4. http://blogs.findlaw.com/free_enterprise/2010/06/federal-reserve-discusses-card-act-credit-card-reform.html
  5. http://knowledgebase.findlaw.com/kb/2010/Jan/59137.html
  6. http://knowledgebase.findlaw.com/kb/2010/Jan/59137.html
  7. http://knowledgebase.findlaw.com/kb/2010/Jan/59137.html

External Links

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