Signed into law on May 22, 2009, most of the provisions in the long overdue Credit Card Accountability Responsibility and Disclosure Act didn’t take effect until February 22, 2010.
Here are some of the highlights of this bill and how they will affect you.
No Interest Rate Increases on Previous Balances
If your credit card issuer raises your rate, it will not apply to any balance that you had prior to the rate increase. The new rate will only be in effect for future purchases. The only exceptions to this rule are:
- If a “teaser” or introductory rate has expired
- Your card has a variable interest rate
- If you are enrolled in a “hardship” payment plan that calls for rate increases over time; you were in a plan that has expired, or if you fail to honor the terms of a plan
- You are more than 60 days late making a payment
- However, if you make your payments on time for the next 6 months then your issuer must reduce your interest rate back to it’s previous level
No Interest Rate Increases for the First 12 Months
If you open a new credit card account, the issuer cannot raise your interest rate within the first year except in the situations listed above.
Universal Default is Banned
This is where a credit card issuer will increase your interest rate – even if you have never made a late payment with them – based solely on your activity with other accounts. As of February 22, 2010, this practice is illegal.
In the past, if you made a purchase that caused your credit card to go over the limit, the charge was usually accepted and you were charged a hefty fee for that “privilege”. But now cardholders will have to “opt in” to receiving over-limit fees. This means that if you do not explicitly agree to being charged for going over your credit limit, any purchase that you attempt to make that will push you over your limit will be denied.
If you agree to these fees, then you must be informed of the amount of the fee and have the option to opt out of the fees at any time. Also, the fee can only be charged once per billing period.
During the first year after a card is issued, the issuer cannot charge fees that total more than 25% of the credit limit on that card. For instance, if you open a credit card with a limit of $500, the total amount of fees that can be charged is $125.
This does not include fees charged for late payments, exceeding your credit limit or having insufficient funds.
This is to stop the practice of offering a consumer a card with a $250 limit and charging $179 in setup and annual fees.
Your issuer must mail your statement at least 21 days before your payment due date. If this is not done, there can be no late fee charged for any billing period where this does not happen. Also, if your card includes a grace period in which you can pay the balance in full and avoid any finance charges, your statement must be mailed out at least 21 days before the finance charges are scheduled to begin.