by Diane Baker
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Pub.
L. 111-24, 123 Stat. 1734) contains extensive statutory changes in card
protections for consumers. The Act is intended to help protect consumers from
abusive fees, penalties, interest rate increases, and other unwarranted changes
in account terms.
The Act, in general, took effect on February 22, 2010, although some changes
went into effect on August 20, 2009, and others will not go into effect until
August 22, 2010. The Board of Governors of the Federal Reserve System is
amending Regulation Z, which implements the Truth in Lending Act, in order to
implement the provisions of the Credit Card Act that are effective on August
20, 2009. These amendments are being issued in the form of an interim final
rule and primarily pertain to advance notices of rate increases and changes in
terms and the time consumers are given to make their payments. This interim
final rule is effective August 20, 2009. Final regulations implementing the
Credit Card Act will be issued at a later date.
Prohibitions and restrictions on rate increases: Effective February 22,
2010, card issuers generally cannot increase the Annual Percentage Rate (APR)
on existing balances for one year after the account is opened except in these
four situations: (1) When the bank disclosed, at the time the account was
opened, that the APR would increase sooner; (2) When the APR for a variable‑rate
card changes due to increases in a published index that is outside the card
issuer's control, such as rates on U.S. Treasury securities; (3) When the
APR, fees or finance charges increase as a result of the consumer not satisfying
a "workout" arrangement; or (4) When the APR, fees or finance charges
increase due to the consumer not making the required minimum payment within 60
After the first year of the account, the card issuer can raise a consumer's
interest rate, but the higher rate can only apply to new transactions and it
cannot exceed the potential interest rate increase previously disclosed to the
The card issuer also must generally provide a 45‑day advance notice of any rate
increase or any other significant changes in account terms, up from 15 days.
This requirement of the law took effect on August 20, 2009. In that same
notice, card issuers must inform consumers of their right to cancel their card
before the rate increase or account changes take effect. Consumers who decide
to cancel their card will repay at the ''old'' (lower) rate, and they cannot be
required to immediately repay the outstanding balance.
New limits on fees and interest charges: One of the most important
changes requires that monthly statements be mailed or delivered at least 21
days before the payment due date, an increase from 14 days. This provides
consumers more time to pay the bill before incurring late fees or additional
interest charges if there is a grace period. This provision of the law took
effect August 20, 2009, and applies to all open‑end credit, including credit
cards and home equity lines of credit.
Improved disclosures: Effective February 22, 2010, credit card issuers
must provide new, clearer and more timely disclosures of account terms and
costs, both before and after an account is opened.
Monthly credit card statements: Effective February 22, 2010, monthly
credit card statements must include a box showing cardholders how much they
have paid in interest and in fees during the current year. Statements must also
include details warning consumers about the high costs of making only the
minimum payment. Statements must also show the monthly payment amount required
to pay off the existing balance in 36 months, including the total cost
(payments and interest). Periodic statements also must disclose, in a
prominent location, the due date for the next payment as well as the amount of
any potential late fee and the date it would be charged. Statements also must
include a notice that one or more late payments may trigger an increase in the
interest rate on the account, and they must show the penalty rate.
Fair deadlines for credit card payments: Effective February 22, 2010,
the due date for card payments must be the same day each month. This change is
intended to prevent consumers from incurring late fees as a result of
accidentally missing a due date because it changes from month to month.
Restrictions on penalties for going over the credit limit: Effective
February 22, 2010, no fees may be imposed for making a purchase or other
transaction that would put the account over its credit limit unless the
cardholder ''opts in'' for the credit card company to process over‑the‑limit
transactions and charge a fee. Furthermore, an over‑the‑limit fee may be
imposed only one time during the billing cycle when the limit is exceeded, not
for each transaction that exceeds the credit limit.
Protections for young consumers: Effective February 22, 2010, companies
will be prohibited from issuing a credit card to a consumer younger than 21
unless he or she submits a written application that includes the signature of a
co‑signer over 21 or information indicating the young consumer has independent
means to repay the card debt. Also, companies are restricted from making pre‑screened
offers of credit to someone under 21 unless the consumer consents to receive