New Credit Card Rules For U.S. Consumers in Credit Card Lending Overhaul of (CARD) Act

Starting August 20, 2009, the U.S. credit card industry sees the most credit lending reform in two decades that is meant to give more power and protection to the U.S. consumer.  The changes appear as part of a new law for credit card reform signed back in May 2009 by President Obama as part of the Credit Card Accountability Responsibility and Disclosure (CARD) Act.  Basically all the rules are designed to do is make it clearer and easier to understand the terms and agreements binding on credit card contracts.  Some of the new rules will be viewed favorably, however, not all the new rules will be good news for consumers.

As a result of the collapse in the credit industries over the past two years, credit card companies have tightened their lending standards and most of them have raised interest rates on an average of 2-4% since November 2008.  Some consumers have even seen their interest rates jump as high as an extra 12% despite having a good credit history.  Citigroup is currently adding $30 annual fees to many of its cards.

The Old Regulations for Credit Card Issuers

• had to mail bills 14 days in advance
• had to give 15 days’ notice of any changes in terms and agreement
• no consumer rights for opting out of rate hikes; cancel cards at your own discretion

The following new regulations apply to all major credit card issuers, such as Bank of America and Citibank.  But they may not yet come into effect for all credit unions, some of which will have extra time to become compliant.

The New Credit Card Accountability Responsibility and Disclosure (CARD) Act

• give consumers at least 21 calendar days to pay monthly bill before late fees kick in
• warn clients 45 days in advance of major changes in contracts
• consumers will be able to reject changes imposed and arrange to close the accounts and pay off the debt according to the old rates
• starting in February, companies will have to include the information on how long it will take to pay off the balance if you choose to pay only the minimum amount
• required to display amount of interest it will cost to pay off balance with minimum-only payments

A second wave of regulations under the Credit CARD Act is due in February 2010 that will tighten lending practices even further, banning the marketing of cards to students, limiting amounts available to students and mandating six-month account reviews.

A third wave of regulations will kick in in July 2010 concerning advertising and marketing practices and other disclosures of fees, rates and terms on each monthly statement.

Have you paid attention to the mail from your credit card companies lately?  I’ll be watching out for something from Citibank, but I haven’t received it yet.

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Tagged as: consumer credit, Credit Card Accountability Responsibility and Disclosure (CARD) Act, credit card companies, credit card reform, new credit card rules, U.S. consumers, U.S. credit cards