C.A.R.D. Act: More Credit Card Legislation

Consumers groups, including labor and civil rights organizations, applaud tough legislation introduced last year by Senate Committee on Banking, Housing, and Urban Affairs Chairman Chris Dodd. The Credit Card Accountability, Responsibility and Disclosure Act (or C.A.R.D. Act) would improve credit card billing, marketing and disclosure rules and prohibit abusive and unfair practices by credit card companies.

“Americans do not deserve to be pushed down the economic ladder by credit card companies. It’s wrong, it’s unfair, and it must end. The CARD Act will protect Americans by bringing an end to wrongful credit card practices and helping to provide consumers with a fair chance to secure economic security in their futures,” Dodd said recently. Many feel the reform is needed now more than ever as the U.S. economy tightens and financially vulnerable families become dependent on their credit cards to stay afloat.

Confusing, misleading, and in some cases predatory practices have become standard operating procedure for many credit card companies. The C.A.R.D. Act strengthens industry regulation and supervision and addresses the most abusive practices including:

Interest Rate and Terms

• Prevents anytime/any reason contract clauses and prohibits account changes to accounts that have had no default action.
• Requires advanced notice for a rate increase.
• Prevents increasing rates on cardholders in good-standing.
• Requires issuers to provide disclosures to consumers upon card renewal when the card terms have changed.

Application of Card Payments

• Prohibits issuers from setting early morning deadlines for credit card payments.
• Payments will be applied to the balance with highest interest rate first.
• Option to instruct issuers to deny transactions that would trigger over-the-limit fees.

Rights of Responsible Credit Card Users

• Prohibit finance charges on debt paid on time (double-billing cycle) and on credit card transaction fees, such as late fees and over-limit fees.
• Statements must be mailed within 21 days of the due date.
• Prohibit late fees upon proof of mailing seven days prior to due date.
• Requires that payment at local branches be credited same-day.

Exorbitant and Unnecessary Rates and Fees

• Prohibits issuers from charging a fee to allow a credit card holder to pay a credit card debt, whether payment is by mail, telephone, electronic transfer, or otherwise.
• Prohibits charging interest on penalty fees.
• Prevents issuers from multiple over-limit fees for exceeding a card limit, and allows such fees only when a cardholder’s action, rather than a fee or finance charge, causes the limit to be exceeded.
• Mandate rate hikes only when changes in the index for variable rate cards, the expiration of an introductory rate or a default relating to the account.
• Penalty fees must be reasonably related to the cost incurred by the card issuer.
• Prohibits late fees for on-time payments

Disclosures of Card Terms and Conditions

• Requires cardholders to be given 45 days’ notice of any interest rate increase;
• Requires issuers to provide individual consumer account information and to disclose the period of time and total interest it will take to pay off the card balance if only minimum monthly payments are made.
• Prohibits rate increases for reasons unrelated to the cardholder’s behavior with respect to that card (universal default ban)

Safeguards for Young People

• Limit aggressive marketing to young consumers
• Credit card issuers would be unable to provide credit cards to consumers under age 21 unless the consumer has a responsible cosigner, can demonstrate ability to repay, or takes a certified financial literacy or financial education course.

* Find more information and learn about the:

  Credit Card Accountability, Responsibility and Disclosure Act (HR 1461: CARD Act) >

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