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The CARD Act Charges Ahead To Protect Consumers

--ClearPoint Credit Counseling Solutions boils down how you'll benefit

A good number of long-awaited consumer protections outlined under the "Credit Card Accountability Responsibility and Disclosure Act of 2009," the Credit CARD Act, will take effect February 22, 2010.

The CARD Act is the most significant consumer credit legislation since Congress passed the Truth in Lending Act (TILA) in 1968. It is, in fact, revising the original TILA. ClearPoint stresses that credit card need to understand the basics of how the new laws will affect how them, beginning when the Act takes effect.

"You can only benefit if you know your rights," says ClearPoint credit counselor Bruce McClary, a "but reading the 33-page Act is too overwhelming for most." To aid consumers in making sense of the new laws, we highlight a few key provisions and provide links for additional information:

Limits on Fees/Interest

• Credit card users must be given a fixed credit limit that cannot be exceeded (previously, consumers were surprised by overlimit fees after unknowingly exceeding their limit).
• Prohibits banks from charging interest on late and overlimit fees.
• Issuers can't raise interest rates on existing balances unless the user is late by 60+ days.
• Creditors can no longer raise rates on borrowers who are current on their cards, but late with payments on other cards.
• For card holders in good standing, issuers cannot raise interest in the first year after issuance, and "teaser rates" must last at least 6 months.
• Prevents creditors from charging an additional fee for users to make a credit card payment by telephone or Internet.
• Ends "double-cycle" billing-basing finance charges on the current and previous balance (which may already be paid off).

Disclosures

• Banks must post the written agreement with the card account holder on the Internet.

Promotions

• "Teaser rates" must last at least 6 months.
• Ads for free credit reports must disclose that they are available under Federal law at AnnualCreditReport.com.

Youth

• Open-ended cards cannot be issued to youth under 21 without the signature of a cosigner.
• Banks cannot send pre-screened credit offers to those under 21.

Payments

• For holders with multiple balances-on one card (from balance transfers or store promotions), payments over the minimum must be applied to the balance with the highest interest rate (minimum payments still go to the lowest interest rate balance).

"Although these reforms favorable to consumers are going into effect, reading the fine print on credit card offers, agreements and updates is crucial," warns McClary. "The wise use of credit is convenient, provides buyer protections and will help build a positive credit history," he adds.

If credit card debt remains an issue, consider speaking with a consumer credit counselor, such as those a ClearPoint, for a free financial review and recommendations. Get started by calling (877) 877-1995 or visiting www.ClearPointCCS.org.

ClearPoint Credit Counseling Solutions (CCCS) is a member of the National Foundation for Credit Counseling (NFCC) and a system-wide accredited business with the Council of Better Business Bureaus.

Additional Resources

Download the Senate Banking Committee's Summary of the CARD Act.
Download the full Credit Card Accountability Responsibility And Disclosure Act of 2009.
See the Federal Reserve System's 210 Page Amendments to the Truth In Lending Act.