In 2008, credit card issuers imposed $19 billion in penalty fees on families with credit cards—exploiting loopholes in the law to make profits at the expense of responsible credit cardholders with minimal oversight. Last May, the House passed, and the President signed, the Credit Cardholders' Bill of Rights (or Credit CARD Act) applying common-sense regulations that ban unfair rate increases and forbid abusive fees and penalties.
The Credit CARD Act contains three separate implementation dates, 90 days, 9 months and 15 months after enactment. The first set of consumer protections went into effect last August—requiring 45 days advance notice of all interest rate and fee hikes and statements be mailed 21 days in advance of payment due dates. Today, a second set of reforms go into effect, including prohibiting arbitrary interest rate increases and prohibiting interest charges on debt paid on time (double-cycle billing ban):
Prohibits arbitrary interest rate increases and universal default on existing balances
Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions, and also limits over-limit fees on electing cardholders
Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
Prohibits issuers from setting early morning deadlines for credit card payments
Prohibits interest charges on debt paid on time (double-cycle billing ban)
Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt or proof that the applicant has an independent means of repaying any credit extended
Protects recipients of gift cards by requiring all gift cards to have at least a five-year life span, and eliminates the practice of declining values and hidden fees for those cards not used within a reasonable period of time
You may have also noticed that your credit card statement now looks different–the Credit CARD Act calls for more transparency and clarity in statements including requiring credit card issuers to disclose how long it will take you to pay off your balance if you only pay the minimum monthly payments. USA Today outlines the other ways your statement will be more transparent:
These reforms, combined with remaining provisions set to take effect in August (including that creditors periodically review all interest rate increases since January 2009 and reduce rates when a review indicates that a reduction is warranted) will protect 91 million households from excessive fees, unfair interest rate hikes, and arbitrary agreements that credit card companies revise at will. Learn more about the Credit Cardholders' Bill of Rights»
Speaker Pelosi on today’s implementation:
Today most of the Credit Cardholders' Bill of Rights will take effect — helping to end the era of unfair penalties and abusive practices by the credit card industry. No longer will America's consumers face credit card industry practices dominated by incomprehensible fine print and hidden fees. No longer will confusing agreements and arbitrary rate increases unfairly punish responsible families and small businesses.
This bill's commonsense reforms will restore fairness when consumers conduct their day-to-day credit transactions. The legislation holds credit card companies accountable and provides meaningful new protections to consumers.
The Credit Cardholders' Bill of Rights sends a clear message to the credit card industry that the business-as-usual that saddles consumers with unfair practices is over. Americans who pay their bills on time and play by the rules do not deserve to be the victims of abusive financial practices. At a time when families are struggling, consumers will save at least $10 billion a year from the bill's prohibition on unfair interest rate increases. The steps taken today move us closer to our goal of greater financial security for the American people.
I commend Congresswoman Carolyn Maloney for her hard work and tenacity in ensuring the success of this legislation.