New Regulations for Credit Card Companies in 2010

You may have noticed some distinct changes on your credit card statements earlier this year. That’s because the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, or the Card Act of 2009, went into effect on February 22nd, 2010. Finally, credit card companies have to be more transparent with their card holders. Here are some of the new rules that were put into place:

When a credit card company wants to increase your interest rate or try to hit you with any type of fee, they now have to give you 45 days notice before they can. Prior to this new law, credit card companies would raise interest rates and fees whenever they wanted.
Credit card companies also have to give you 45 days notice if they want to make any significant changes to the terms of your card. This means they must now give you the option to cancel the card before certain fees increase or take effect. Unfortunately, if you take that option, your credit card company may close your account and increase your monthly payment.

Credit card companies do not have to give you 45 days notice if:

You have a variable interest rate tied to an index. If the index goes up, the creditor does not have to provide notice before your interest rate goes up.
Your introductory rate expires and reverts to the previously disclosed Annual Percentage Rate or APR%.
Your interest rate increases because you are in an internal hardship program and haven’t made the payments you agreed upon.

Credit card companies now have to inform you of how long it will take to pay off your balance.

You will notice your credit card statements will show you how long it will take to pay off your balance if you only make the minimum payments, and how much you would need to pay each month to get the balance paid off in three years.

No interest increases for the first year. Credit card companies cannot increase your interest rate for the first 12 months after you open an account; however, there are some exceptions:

If your card has a variable interest rate tied to an index, unfortunately, your interest rate can go up whenever the index goes up.
If you have an introductory rate, it must be in place for at least 6 months, but after that, your rate can revert to the APR% rate the company disclosed when you received the card.
If you are more than 60 days past due on your bill, your rate can go up, and if you are in a hardship program and don’t make the agreed upon payment, your APR% rate can go up.

Increased rates apply only to new charges. If your credit card company decides to raise your APR% rate after the first year, the new interest rate will apply only to new charges you make. If you have a balance, the old interest rate will apply to this balance.

Protection for underage consumers. Anyone under the age of 21 will now need to show that they are able to make payments; otherwise, a cosigner will be needed to open a credit card account. Also, if you are under the age of 21, have a cosigner, and would like to increase your credit limit, your cosigner must agree in writing to this increase.

Caps on high-fee cards. If you have a credit card that requires you to pay fees, such as annual or application fees, these fees cannot total more than 25% of the initial credit limit. This does not apply to penalty fees, like late payments.

Changes to billing and payments:

Standard payment dates and times. Credit card companies must mail or deliver your credit card bill at least 21 days before your payment is due. Also:

Your due date should fall on the same date each and every month, and your cut-off time cannot be earlier than 5:00 p.m. on the due date.
If your payment due date falls on a weekend or holiday, you will have until the following business day to pay without penalty.

Payments directed to highest interest balances first. If you make more than the minimum payment required on your credit card bill, your credit card company must apply the extra amount to the balance with the highest APR% rate. The only exception is:

If you made a purchase under a deferred interest plan, like no interest if paid by a certain date, the credit card company may let you choose to apply the extra amount to the deferred interest balance before other balances. Otherwise, for two billing cycles prior to the end of the deferred interest period, the credit card company must apply your entire payment to the deferred interest rate balance first.

No two-cycle or double-cycle billing allowed. Credit card companies can only impose interest charges on balances in the current billing cycle.

New Credit Card Rules Effective August 22nd, 2010

Reasonable penalty fees

Your credit card company can no longer charge you a late payment fee that is greater than your minimum payment. Similarly, if you exceed your credit limit by $10.00, you cannot be charged an over the limit fee of more than $10.00.

If you are late making your minimum payment today: You will be assessed a late fee as high as $39.00, and you will most likely pay this same fee no matter what your minimum payment may be.

Under the new rules: Your credit card company cannot charge you a fee of more than $25.00 unless:

One of your last six payments was late, in which case your fee may be up to $35.00.
Your credit card company can show that the costs it incurs as a result of late payments justify a higher fee.

Additional Fee Protections

No inactivity fees. Your credit card company cannot charge you an inactivity fee if you are not using your card.

One-fee limit. Your credit card company cannot charge you more than one fee for a single transaction or event that violates your cardholder agreement. This means, for example, that you cannot be charged more than one fee for a single late payment.

An explanation of rate increases is needed if your credit card company wants to increase your APR% rate. Credit card companies can no longer just raise your interest rates without telling you why first.

Re-evaluation of recent rate increases

Today: Your credit card company can increase your card’s APR% with no obligation to re-evaluate your rate increase.

Under the new rules: If your credit card company increases your APR%, they must re-evaluate that rate increase every six months. If appropriate, they must reduce your interest rate within 45 days after completing the evaluation.

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