The Credit CARD Act: A Rundown (Business Insider)   Leave a comment

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 helps ensure that card issuers act fairly and do not try to find loopholes to exploit naïve customers. President Barack Obama signed it on May 22, 2009.

“With this new law, consumers will have the strong and reliable protections they deserve,” President Obama said. “We will continue to press for reform that is built on transparency, accountability, and mutual responsibility – values fundamental to the new foundation we seek to build for our economy.”

Under this act, banks can’t play their favorite tricks such as hiding fees, setting random weekend or midday deadlines, changing monthly due dates and practicing double-cycle billing, where interest is charged for the previous and current balance.

Some specifics: Card companies are prohibited from raising introductory rates — unless the account is 60 days delinquent. This applies to zero balance transfer offers, too.

However, although customers get rewarded for timely repayment of debt with credit limit increase, a seriously delinquent account justifies a rate increase under the new law.  As a punishment for being late the bank, aside of increasing interest rate, can charge a late fees up to an amount equal to a minimum monthly payment or up to $25 per month. Additionally a $10 increase can be applied to seriously delinquent accounts. None the less, the cap on monthly payments can go as high as $35 if the customer fails to meet a payment in the subsequent six billing cycles (or if the issuer has evidence that the costs incurred by the missed payment require a higher fee). Because of these limitations, Banks are losing some money, but on the good side, customers are now more protected and bank policies become ever more transparent.



Additionally, while banks engage competition with attractive offers such as 0% balance transfer deals, the card issuers look to offset their losses by inventing new fees and policies that do not violate CARD Act. The banks still manage to fill their coffers, but may subsequently hurt American Consumer. This is why transparency enforced by the new law is so important to make an intelligent choice when selecting a credit card.

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Posted April 2, 2011 by ilanamelissagreene in Uncategorized

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