The Credit Card Accountability, Responsibility, and Disclosure Act (“CARD Act”) went into effect on February 22, 2010. The CARD Act was intended to rein in perceived abuses by credit card issuers.
The law requires card issuers to: (1) provide at least 45 days’ notice to most customers before making significant changes to their card, such as hiking the interest rate or fees; (2) inform customers on their monthly bill how long it will take to pay off their balance if they make only minimum payments; (3) mail a monthly bill at least 21 days before payment is due and not use holidays and weekends as an opportunity to levy late fees; and (4) apply payments to the highest interest balances first.
The law also prohibits card issuers from the following: (1) increasing the card’s interest rate in the first year of the account in most cases; (2) applying any increase in rates to old charges in most cases; (3) charging an over-the-limit fee unless the customer affirmatively authorizes such charges; (4) issuing cards to consumers under 21 years of age unless they show they have the ability to make payments or have a co-signer; and (5) using double-cycle billing, where interest charges are imposed on purchases that have already been paid off. Consumer advocates have applauded these new credit card fee and rate restrictions, but worry that credit card issuers will simply look for loopholes in the legislation or seek to recoup the lost income through higher annual fees, higher interest rates across the board, and through other means.