- Bargaineering - http://www.bargaineering.com/articles -

Credit CARD Act of 2009 Guide: How It Affects Us

Last year, you probably read a lot in the news about the Credit CARD Act of 2009 [3] and how it had credit card companies running for the hills. There were stories about how issuers were going to start implementing annual fees, cut back on reward programs, and how the credit card industry was going to get rocked. While some of it has come true (Citi has notified some cardholders that there would be an annual fee unless they spent a certain amount each year [4]), much of it was just pre-bill posturing.

What Is It?

H.R. 627 The Credit CARD Act of 2009 [3] amended the Truth in Lending Act to establish new rules for what credit card issuers could do to credit card holders. The bill put in place several consumer protections, most notably restrictions on interest rate hikes, fees, and penalties, that will begin taking effect this month. Several other notable provisions include bans on issuing cards to minors (under the age of 18) and increasing the requirements for those under the age of 21.

Some provisions went into effect on August 20 but the bulk of the major changes will begin in one week, on February 22nd. This article will discuss those changes you should see next week as they were outlined by the Federal Reserve [5] (they issued guidelines explaining how the provisions of the Act were to be followed).

The Credit CARD Act’s original name was the Credit Card Accountability Responsibility and Disclosure Act of 2009 until it was shortened to CARD and the bill was signed into law by President Obama on May 22nd, 2009.

Major CARD Act Rules

I suspect most issuers will be in compliance, as they’ve had almost a year to put these changes into effect, it’s still important to know the law in case unscrupulous issuers try to pull some tricks.

What does opting out of an interest rate hike mean? In the case of card agreement changes, cardholders have the right to “opt out” of those changes. When you opt out, you will no longer be able to use the card to make purchases but you continue to pay off the balance at the original interest rate. The credit card company has a few options for what they can do:

NOTE: None of the options include complete repayment of the balance.

New Rules for Minors, College Students

New Gift Card Rules

The Card Act wasn’t restricted to just credit cards, it instituted new rules for gift cards as well. Prepaid cards, gift cards and certificates cannot expire within 5 years unless the terms are clearly stated. The Act also bans dormancy or inactivity fees unless the card has not be used in a 12 month period and the fees are clearly stated. Remember, your state gift card protections [7] may exceed these federal protections and the strongest law wins.

The law has some other less specific provisions that probably don’t apply to most people. It calls out for various studies on credit availability, merchant interchange fees (what the credit card processing industry charges businesses to accept cards), and other credit related items. There are provisions for credit card debt and estate issues, financial literacy, and a bit on what happens if an issuer violates the law (minimum fine of $500 and a max of $5,000).

Whew! That’s a lot isn’t it? Please let me know what you think of the act!

(Photo: thetruthabout [8])