The Credit Card Accountability Responsibility And Disclosure Act
Last Updated May 17, 2009
Here is an overview of the new legislation proposed by Congress to reform the way credit card companies do business. We will be updating this information as the bill evolves during the legislative process. This legislation is meant to supplement the credit card reform bill passed last year. The provisions of the previous bill will not take effect until July 2010. This bill will put most of the reforms into effect within 9 months.
Of course, the banking industry is violently opposed to this bill, issuing dire warnings that it will make credit more expensive for everyone. Critics of the credit card industry say "fee harvesting" practices, which the bill should prevent are driving more Americans to the financial breaking point and our economy deeper in trouble.
Some of the features which the current bill proposes:
Prevents Unfair Increases in Interest Rates and Changes in Terms
- Prohibits arbitrary interest rate increases and universal default on existing
balances;
- Requires a credit card issuer who increases a cardholder’s interest rate to
periodically review and decrease the rate if indicated by the review;
- Prohibits credit card issuers from increasing rates on a cardholder in the first
year after a credit card account is opened;
- Requires promotional rates to last at least 6 months.
Prohibits Exorbitant and Unnecessary Fees
- Prohibits issuers from charging a fee to pay a credit card debt, whether by mail,
telephone, or electronic transfer, except for live services to make expedited
payments;
- Prohibits issuers from charging over-limit fees unless the cardholder elects to
allow the issuer to complete over-limit transactions;
- Requires penalty fees to be reasonable and proportional to the omission or
violation;
- Enhances protections against excessive fees on low-credit, high-fee credit
cards.
Requires Fairness in Application and Timing of Card Payments
- Requires payments in excess of the minimum to be applied first to the credit
card balance with the highest rate of interest;
- Prohibits issuers from setting early morning deadlines for credit card payments;
- Requires credit card statements to be mailed 21 days before the bill is due
rather than the current 14.
Protects the Rights of Financially Responsible Credit Card Users
- Prohibits interest charges on debt paid on time (double-cycle billing ban);
- Prohibits late fees if the card issuer delayed crediting the payment;
- Requires that payment at local branches be credited same-day.
Ensures Adequate Safeguards for Young People
- Requires issuers extending credit to young consumers under the age of 21 to
obtain an application that contains: the signature of a parent, guardian, or other
individual 21 years or older who will take responsibility for the debt; or proof that
the applicant has an independent means of repaying any credit extended;
- Limits prescreened offers of credit to young consumers;
- Prohibits increases in the credit limit on accounts where a parent, legal
guardian, spouse or other individual is jointly liable unless the individual who is
jointly liable approves the increase in writing.
Gift Card Protections
- Protects recipients of gift cards by requiring all gift cards to have at least a fiveyear
life span, and eliminates the practice of declining values and hidden fees
for those cards not used within a reasonable period of time.
For more info on the bill and to track its progress, see this website, http://www.defendyourdollars.org.
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