As promised a while ago, we are going into the nitty-gritty of the credit card act that has passed and went into effect as of February 22 2010. We have summarized many key elements of the changes that have been made, and now we are going to detail specific changes, according to the actual sections of the Act. We will not rewrite the sections; in fear of misleading our readers, but we will offer an interpreted statement at the end of each section. This is the exact website that we have taken this information (It is a PDF File) as our reference and guide for this post. The same reference will be used for Section 2, because this is a rather long subject that we felt should be broken up into 2 separate entities for ease of readership and so you will not fall asleep. (just kidding guys!). Please note that our summative is in purple and italicized.
Sec. 101: Prior notice of rate increases required.
Prohibits increase in APR without 45 days= notice. Prohibits applying rate increases retroactively to existing balances. Requires clear notice of right to cancel credit card when APR is raised.
Simply put: the credit card companies and banks cannot just rise the APR (Annual Percentage Rate)without 45 days notice and they cannot rise APR on pre-existing balances. If this occurs, the customer has the right to cancel their credit account.
Sec. 102: Freeze on interest rate terms and fees on canceled cards.
Prevents APR from being raised, or repayment terms being cancelled, if a cardholder cancels a card.
Credit card companies and banks cannot rise the APR either cases of the repayment terms have been cancelled or the customer cancelled their credit account.
Sec. 103: Limits on fees and interest charges.
We actually are not going to attempt to decipher most of these entries in fear of misleading our readers.
- Prohibits double cycle billing: Prohibits credit card issuers imposing interest charges on any portion of a balance that is paid by the due date.
- Over-the-limit fee restrictions: Cardholders must be given the option of having a fixed credit limit that cannot be exceeded, and card companies cannot charge over limit fees on cardholders with fixed limits. Cardholders may elect to prohibit the creditor from completing over-limit transactions that will result in a fee or constitute a default under the credit agreement. Over-limit charges can only be charged when an extension of credit, rather than a fee or interest charge, causes the credit limit to be exceeded. Over-limit charges can only be applied once during a billing cycle.
- Prohibits charging interest on fees: Prohibits the charging of interest on credit card transaction fees, such as late fees and over-limit fees.
- Limits on charging certain fees: Prohibits credit card issuers from charging a fee to allow a credit card holder to pay a credit card debt, whether payment is by mail, telephone, electronic transfer, or otherwise. Requires fees to be reasonably related to cost. Foreign currency exchange fees may only be imposed in an account transaction if the fee reasonably reflects costs incurred by the creditor and the creditor publicly discloses its method for calculating the fee.
Sec. 104: Consumer right to reject card before notice is provided of open account.
Gives cardholders who get pre approved the right to reject the card up until they activate it without having their
FICO'ish Pie Chart
Effective Since February 22 2010
credit adversely affected.
Customers will have a choice whether to accept their new credit card or deny it so long as they do not activate their credit card without it hurting their credit score or history.
Sec. 105: Use of terms clarified.
Prevents card companies from using the terms Afixed rate@ and Aprime rate@ in a misleading way by establishing a single definition.
Sec. 106: Application of card payments.
Prohibits credit card companies from setting early deadlines for credit card payments. Requires payments to be applied first to the credit card balance with the highest rate of interest, and to minimize finance charges. Prohibits late fees if the card issuer delayed crediting the payment. Prohibits card companies from charging late fees when a cardholder presents proof of mailing payment within 7 days of the due date.
Sec. 107: Length of billing period.
Requires credit card statements to be mailed 21 days before the bill is due (current requirement is 14 days).
Sec. 108: Prohibition on universal default and unilateral changes to cardholder agreements.
Prevents credit card issuers from increasing interest rates on cardholders in good standing for reasons unrelated to the cardholders behavior with respect to that card. Prevents credit card issuers from changing the terms of a credit card contract for the length of the card agreement. Allows penalty rate increases only for specific, material actions or omissions of the consumer specified in the card agreement. Requires issuers to lower penalty rates that have been imposed on a cardholder after 6 months if the cardholder commits no further violations.
The credit industry cannot magically raise their penalties (such as raising the interest rate or lowering the customer’s credit limit) without valid reason or to those who have shown good credit standing. In any event, the customer must be notified of any changes to their account before changes are to be made.
Sec. 109: Enhanced penalties.
Increases existing penalties for companies that violate the Truth in Lending Act for credit card customers.
If for any reason that the credit card company is misleading or does not be clear in writing its actions to the customer, they can be fined as it states in the Truth in Lending Act for credit card customers laws.
Sec. 110: Enhanced oversight.
Requires the credit card issuers primary regulator to evaluate the credit card policies and procedures of card issuers to ensure compliance with credit card requirements and prohibitions. Improves existing data collection efforts related to credit card interest rates, fees, and profits.
In other words, they are going to make sure that the credit industry is kept under tight surveillance and makes sure that they practice better practices towards their customers.
Well folks, that concludes the first section of the The Credit Card Accountability Responsibility and Disclosure Act of 2009 Section by Section Summary. As we have stated at the top, we did not change any sectioned items because it will be unwise to do so, but made comments at the very end. All in all, this only is a small part of a bigger picture of the credit card act. Section 2 of this legal and complicated matter!
Last Note: as mentioned, we name the exact link where we got this information from, so you know that we are pulling things out of our hats. You are welcome to do your research to get the specifics. This is part of our ongoing commitment to you to gather research that is relavent and valid!
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