First of credit CARD Act Protections take effect
Thursday, August 20, 2009
Washington, DC—Three months after the Credit CARD Act was signed into law, the first three provisions will take effect today, Thursday, August 20. Championed by Consumers Union, the nonprofit publisher of Consumer Reports magazine, and many other consumer groups, these new protections will provide relief to millions of American families.
What the newly effective credit card protections mean to consumers:
No more gotcha late fees because the bill was received too late to get the payment in on time. A payment cannot be treated as late unless the bill is sent at least 21 days before the payment due date.
More notice when the terms of the card get worse. Card companies must provide 45 days advance written notice to the consumer of changes in any of these significant terms of the credit card account:
Annual Percentage Interest Rate increases
Changes between a fixed and a variable interest rate
A reduction in or loss of the grace period
An increase in the minimum payment
The method for computing the balance
A right to avoid the adverse change by rejecting the new term. If you reject, the bank can cancel the card and make you pay if off under your old terms, but with a higher minimum payment. Your new payment could be double your old minimum payment, or higher if needed to pay off the card in five years. If the only change is a change in the minimum payment, the Federal Reserve Board has said that the credit card company is excused from giving this notice of a right to cancel.
The most fundamental of the new provisions go into effect on Feb. 22, 2010, including a provision to stop rate increases from applying to existing balances unless the consumer’s payment was 60 days late, the rate change is under a variable rate formula, or it is the end of a promised promotional period.
Cardholders face risks until all of the CARD Act’s protections begin next February.
“The credit card industry asked Congress for a long lead time to implement the new law, but they are using that time to hike rates and payments,” said Gail Hillebrand, Financial Services Campaign Manager for Consumers Union. “Consumers need to be wary about credit card companies raising their rates arbitrarily, and we need a better system to stop credit card banks from developing new types of traps and gotcha practices. The Consumer Financial Protection Agency proposed by the Administration is the next step to stamp out new tricks from the credit card industry and help millions of Americans get out of the cycle of never-ending debt.”
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.