The majority of the provisions in the Credit Card Accountability, Responsibility and Disclosure Act (the Credit Card Act) take effect in February 2010. However, a few of the provisions go into effect August 20.
One helpful provision that starts this month requires credit card issuers to give 45 days notice before any rate hike, as well as any other significant change in terms, such as fee increases. This notice requirement does not apply to rate hikes due to index movement, promotional rate expiration or failure or completion of a hardship agreement.
Another provision of the Card Act that takes effect this month states that issuers must mail or deliver periodic statements 21 days or more before the payment due date in order to charge a late fee.
Here is the breakdown by category of the rest of the changes coming in February 2010.
Consumer Protection
- Retroactive interest rate increases are banned except when a cardholder is more than 60 days late paying a credit card bill.
- Credit card issuer must review the cardholder’s account six months after increasing the interest rate, and return the APR to the previous lower level if the cardholder has been on-time with payment.
- Interest rate cannot be increased within the first 12 months, and promotional rates must have a minimum of 6 months duration.
- The practice of universal default and double-cycle billing are no longer allowed.
- Over credit limit fees are now prohibited unless consumers specifically agree to allow transaction to go through instead of being denied.
- Payments a cardholder makes must be credited as on-time if the payment is received by 5 p.m. on the due date.
Enhanced ConsumerDisclosures
- Clear disclosure on how long it would take to pay off a credit card balance if cardholder makes only the minimum payment each month.
- Clear disclosure on the total cost in interest and principal payments if a cardholder makes only the minimum payment each month.
- Late payment deadline and postmark date are required to be clearly shown and disclosed to cardholders.
Protection of Young Consumers
- Credit cards cannot be issued to people under the age of 21 unless they have an adult co-signer or show proof that they have the means to repay the debt (proof of reasonable income).
- College students will be required to receive permission from parents or guardians in order to increase credit limit on joint accounts they hold with those adults.
- People under the age of 21 will now be protected from pre-screened credit card offers unless they specifically opt-in for offers.
Gift Cards
- Gifts cards are now required to remain active for at least five years from the day of their activation.
- Dormancy or inactivity fees on gift card can no longer be imposed unless there have been no activity in as twelve month period.
- Dormancy or inactivity fees must be clearly disclosed to gift card buyers.
- If the gift card expires after five years, the terms of expiration need to be clearly disclosed to gift card buyers.
For a copy of Senate Bill 414 go online to the Library of Congress to the 111th Congress and print bill S.414.