In May of 2009, The Credit Card Accountability Responsibility and Disclosure Act of 2009, or the Credit CARD Act of 2009 was signed by President Obama.   The bill becomes effective in February of 2010 and will include protection for credit card holders such as limits on fees and interest charges, use of terms clarified, requirements for how payments must be applied, and protection of young consumers. 

I personally, received my first credit card at age 18.  It resulted in my first negative credit rating.  Honestly,  I wasn’t mature enough to handle the responsibility – but even more importantly, I didn’t have the income to take on any debt.  The new bill gives special protections for people under the age of 21.  They either need a co-signer or proof that there is sufficient income to repay credit.  If there is a co-signer involved, there can be no credit limit increases without the co-signers approval. 

Right now, credit card companies charge exorbitant amounts for over the limit fees.  This often happens to consumers who didn’t even realize the last purchase brought them slightly over their credit limit.  The new law will require that any over the limit fee is proportionate to the overage – there can’t be large rate increases for a small purchases that barely brings a consumer over their limit. 

Some creditors have been mailing statements late, or changing due dates.  Now, statements have to be mailed 21 days BEFORE the bill is due (it used to be 14 days) and there must be a 45 day notice of any change to fees or rates.  It also requires that payments over the minimum be applied to the credit card balance with the highest rate of interest (instead of the lowest interest balances). 

Consumers have fallen deeper into debt, when they make a late payment and their interest rate sky rockets.  The new law requires that under these circumstances, the credit card company must review (AND DECREASE) the interest again after 6 months of paying the minimum balance on time.  Also, full disclosure is required – including the true time and cost of paying only the minimum payment. 

“Universal default” allowed credit card companies to review a consumer’s credit, and if a consumer was 30 days late on ANY payment (even to another creditor) the consumer’s interest rate could be increased.  This bill prevents this from happening. 

This is a great step in the right direction.  Finally consumers are getting the protection they deserve.