Credit Card Accountability, Responsibility, and Disclosure Act - Explained
What is the Credit Card Accountability, Responsibility, and Disclosure Act?
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Table of ContentsWhat is the Credit Card Accountability, Responsibility, and Disclosure Act of 2009?How Does the Credit Card Accountability, Responsibility, and Disclosure Act Of 2009 Work?Credit CARD Act 2009 ProvisionsWhy is the Credit CARD Act of 2009 Important
What is the Credit Card Accountability, Responsibility, and Disclosure Act of 2009?
The credit card liability and transparency law, also known as, CARD Act is a legislation that protects consumers from possible abuse by credit card issuers. The law was passed by the United States Congress in 2009 and signed by President Barack Obama on May 22, 2009. The Bill was supported by both the Senate and the House of Representatives. It contains comprehensive information and offers consumers a fair and transparent credit card plan options.
How Does the Credit Card Accountability, Responsibility, and Disclosure Act Of 2009 Work?
Credit CARD Act 2009 Provisions
There are various provisions included in the bill aimed at limiting how credit card companies can impose charges. However, they do not cover things such as rate caps, price controls, or fee settings. They include the following:
- Providing consumers with enough time to pay their bills
After mailing the bill, consumers should be given a grace payment period of not less than 21. Credit card companies should not push consumers to make a payment on weekends or in the middle of the week. Payment should be at the end of the month, with deadlines scheduled during business days and not during weekends or holidays.
- Prohibits retroactive rate increases
In case of any plan to increase the rates, the credit card companies should give consumers a notice period of not less than 45 days. The companies are not to change any contract terms within a year. In addition, the introductory rates are required to last for at least six months before changing. The companies are also supposed to issue consumers with statements highlighting how long it will take them to settle their existing balance if paid in minimum. They must also show the amount payable and total interest cost that consumers should pay off as balance in the 36 months.
- Excludes fee Harvester Cards
The bill restricts the fees that apply to low-balance cards sold to the consumer with poor credit scores. For such cards, there is an up-front fee charged, which should be more than the remaining credit. There is restriction by the act regarding fee charges for gift cards as well as other prepaid cards.
- Removes excessive marketing to young people
The act restricts credit card companies from providing consumers under the age of 21 years with credit cards. Such consumers must first give proof of their independent earning (income) before applying for the card. Another alternative is for them to get a co-signer before they can apply for one. The act also prohibits credit card companies from offering consumers under the age of 21 years who are also credit care holders with incentives.
Why is the Credit CARD Act of 2009 Important
The bill has helped consumers to save money related to late fees of over $7 billion. It has also protected them from losing money related to over-limit fee charges. For instance, between 2011-2014, consumers were able to save over $9 billion. In other words, the law protects consumers from losing money through unnecessary fee charges. It also protects consumers from harmful and confusing billing, including harmful business practices. The law restricts creditors from raising fees and interest rates on credit cards. If the credit card issuers want to raise such fees or charges, there are regulated billing practices and standardized disclosures they are required to follow.