New Credit Card laws
In May 2009, President Barack Obama approved the Credit Card Accountability, Responsibility and Disclosure Act of 2009. There are 8 key changes set to go into effect as of February 22, 2010.
The first change prevents retroactive rate increases on credit cards. Previously, credit card issuers were allowed to raise interest rates for any reason. Issuers will now only be able to raise interest rates on existing balances if promotional rates expire, the index rate increases or if the borrower is 60 days in default.
The second change requires credit card issuers to give borrowers a 45 day notice period before they raise interest rates on new purchases. Presently, issuers only give a 15 day notice. Issuers can still lower a borrower’s credit limit without giving a lengthy notice.
The third major change is fee restriction, which protects cardholders from over limit fees unless they specifically request the issuer to allow over limit transactions. Issuers are no longer allowed to charge a fee when a borrower pays their bill.
The fourth major change requires issuers to send the credit card statements out three weeks prior to the due date. This is one week later than the two week notice currently in effect.
Gift card protection is the fifth change in the Credit Card Act. The new law prevents gift card expiration until five years after they are issued, and non usage fees can’t occur unless the card isn’t used for 12+ months.
Double cycle billing, which bases interest charges on debts paid off the previous month, is restricted in the new Credit Card Act and is the sixth major change.
The seventh major change is restricting college students from accessing credit cards. If someone under the age of 21 applies for a credit card, they will now be required to prove income or have an older co-signer. Some fear this will lead student to taking on unsecured and high interest loans from other sources.
The eighth change under the Credit Card Act restricts issuers from applying payment towards the lowest interest credit charge. Under the new act, all payments above the minimum payment will be first applied to the highest interest debt.