MIAMI-DADE – A new credit card law designed to provide consumers with some relief from abusive industry practices, such as arbitrary rate increases and double-cycle billing, went into effect on February 22, 2010.
The Credit Card Accountability, Responsibility and Disclosure Act, also known as the CARD Act, improves transparency, requiring credit card companies to make more disclosures of their terms to consumers. It also establishes other sweeping changes to prevent exorbitant fees.
The Miami-Dade Consumer Services Department outlines some of the new rules in this edition of ConsumerWise and advises cardholders to be sure to read all the credit card notifications you receive in the mail. By doing so, you can stay on top of any changes that may affect your bottom line.
Common Rip-offs
· Big rate hikes are not gone for good. In order to receive some of the benefits under the new law, such as interest rate relief, you must be current on your bills. Credit card companies may also raise interest rates as long as they provide 45 days’ advance notice. In the meantime, some banks are moving consumers over to variable rate cards whose rates fluctuate based on the direction of the prime rate. Under this circumstance, notice of incremental changes is not required.
· New fees. Anticipating a loss in revenue due to the new restrictions, some credit card companies will be relying more than ever on imposing new fees. While there are no restrictions on the types of fees issuers can implement, consumers can avoid unpleasant surprises by paying close attention to the “Terms and Conditions” section of their statement.
· Limited access to credit. Issuers may impose stricter rules on consumers when they apply for credit. They may demand details about income or proof of other savings to ensure they are able to collect on a debt.
· Fewer rewards. To save money, some companies are tightening the purse strings on their rewards programs, making it more difficult for consumers to cash in on their accumulated points. If you’re late on a payment, for example, you may have to pay a fee to recoup your rewards points.
Consumer Smarts
· Prior notice of rate increases required. Prohibits increase in APR without 45 days’ notice. Prohibits applying rate increases retroactively to existing balances. Requires clear notice of right to cancel credit card when APR is raised.
· Freeze on interest rate terms and fees on canceled cards. Prevents APR from being raised, or repayment terms being cancelled, if a cardholder cancels a card.
· Limits on fees and interest charges.
o Prohibits double cycle billing: Prohibits credit card issuers imposing interest charges on any portion of a balance that is paid by the due date.
o Over-the-limit fee restrictions: Cardholders must be given the option of having a fixed credit limit that cannot be exceeded, and card companies cannot charge overlimit fees on cardholders with fixed limits. Overlimit charges can only be applied once during a billing cycle.
o Prohibits charging interest on fees: Prohibits the charging of interest on credit card transaction fees, such as late fees and overlimit fees.
· Consumer right to reject card before notice is provided of open account. Gives cardholders who get preapproved the right to reject the card up until they activate it without having their credit adversely affected.
· Application of card payments. Requires payments to be applied first to the credit card balance with the highest rate of interest to minimize finance charges. Prohibits late fees if the card issuer delayed crediting the payment. Prohibits card companies from charging late fees when a cardholder presents proof of mailing payment within 7 days of the due date.
· Length of billing period. Requires credit card statements to be mailed 21 days before the bill is due (current requirement is 14 days).
· Prohibition on universal default and unilateral changes to cardholder agreements. Prevents credit card issuers from increasing interest rates on cardholders in good standing for reasons unrelated to the cardholder=s behavior with respect to that card.
· Enhanced disclosures:
o Payoff timing disclosures: Requires credit card issuers to provide individual consumer account information and to disclose the period of time it will take the cardholder to pay off the card balance if only minimum monthly payments are made and the total amount of interest the cardholder will incur if only minimum monthly payments are made.
o Late payment deadlines and penalties: Requires full disclosure in billing statements of required payment due dates and applicable late payment penalties. Requires that cardholders be given a reasonable period to make payment. Requires that payment at local branches be credited same-day.
o Renewal disclosures: Requires card issuers to provide account disclosures to consumers upon card renewal when the terms of the card have changed.
· Protection of young consumers. Consumers under age 21 who can’t prove an independent means of income or provide the signature of a co-signer aged 21 or older won’t get approved for credit cards. The provision protects young people who lack the means or the knowledge to handle credit cards from miring themselves into debt.
Additional restrictions on credit card practices are scheduled to take effect August 2010. For more specific details on the new CARD Act, please visit the U.S. Senate Committee on Banking, Housing & Urban Affairs website or Consumer-Action.org.
For more consumer tips, or to check the complaint history of a company, file a complaint or ask consumer-related questions, visit the Miami-Dade Consumer Services Department website at www.miamidade.gov/csd or call (305) 375-3677.
