The Credit Card Accountability and Responsibility and Disclosure Act of 2009 (or the Credit CARD Act) was passed by Congress and signed into law by President Obama on May 22, 2009.
Its provisions include:
- Protections against unfair interest rate increases, including a ban on retroactive increases done at any time for any reason, protection against hikes in the first year of an account, and the requirement of 45 days notice before any increases are put into place.
- Banning fee traps by giving cardholders at least 21 days to pay their bills, forcing companies to apply excess payments to the highest interest balance first, and requiring that consumers opt in to over-limit fees.
- Putting contracts and statements into plain language that consumers can understand and disclosure of the consequences of their account decisions.
- Increased accountability from card issues in complying with regulations and from regulators enforcing them.
What's the significance?
Over the last 30 years, credit card companies have been very loosely regulated and they developed abusive and predatory practices, which this bill attempts to curb. It also aims to empower consumers to make informed choices about credit products by bringing transparency to contracts and practices. However, it may not have gone far enough, as banks are already finding ways around it. Upfront interest rates are soaring, for example, as companies anticipate lost revenue from no longer being able to jack them up at will.
Who's talking about it?
Bryce Covert notes all the loopholes banks were already finding in the Act by the time the last phase was implemented, including interest rates that are getting as high as 59%...Banks could lose up to $25 billion in revenue a year due to the new regulations...Thirty-seven percent of consumers surveyed by Business Insider reported seeing negative changes in their credit card accounts since it passed...But James B. Kelleher reports that the new rules haven't restricted consumers' access to credit.