Credit Card Act of 2009

The Credit Card Act of 2009 is an amendment to the Truth In Lending Act (TILA) of 1968. The TILA is a federal law that is designed to protect consumers in transactions by requiring clear disclosure of key lending terms along with all associated costs in obtaining credit.

The purpose of the Credit Card Act of 2009 is focused around 3 guiding principles: (1) Better Consumer Protection, (2) Enhanced Disclosures for Credit Products, and (3) Protection for Young Consumers. It will go into effect in February, 2010.

The Act will help consumers specifically in the following ways:

-Credit Card issuers will not be able to change a cardholder’s interest rate on a delinquent balance until the account is at least 60 days past due.
-Issuers can’t raise interest rates on new accounts for at least 1 year, and promotional rates can’t be adjusted for at least 6 months. This ends the practice known as Universal Default where issuers could raise the interest rate on a customer’s account based on the customer’s performance with other creditors.
-Credit Card statements must be mailed 21 days before the payment due date.
-Cardholders must get at least 45 days notice in writing if terms on their account will change. Currently, it is 15 days.
-All gift cards must have at least a 5 year life.
-For consumers under 21 years of age, a credit card issuer must get the signature of a parent or another party who will be responsible for the debt, or obtain proof that the young consumer can repay the debt.

These are among the changes that will go into effect next year. However, there are some things that consumers need to be aware of in advance of the law going into effect:

-Credit Card issuers will change cards with a fixed rate of interest to a variable rate.
-Incentive programs will be scaled back, and perhaps eliminated.
-Credit limits on accounts will be managed more aggressively by issuers and late payments will be dealt with harshly.
-Issuers will include provisions in new account disclosures to charge overlimit fees, and will raise other fees as well. (Fee income is significant to issuers, and late fees alone in 2009 that will be collected are estimated to be $20 billion!)
-Customers’ minimum payments will go from 2% to 5% in some cases, and balance transfer fees resulting from moving a balance from one credit card account to another will go from 3% to 5%.

Consumers should do the following things right away:

-Inspect credit card statements closely and make sure to read the fine print.
-Scan the credit card statement to see if any fee increases or changes in the interest rate on the account are forthcoming.
-Shop around for credit cards that offer fixed vs. variable rates. Bankrate.com, or Creditcards.com are good websites for that purpose.
-Pay off balances every month and don’t get on the “revolving” merry-go-round.