New York City Debt Collection Defense Attorney

5 Ways the C.A.R.D. Act is Helping Consumers of Credit

On May 22, 2009, President Barack Obama signed the Credit Card Accountability, Responsibility and Disclosure Act into law. Since then, consumers have saved over 12 billion dollars, below are five ways the law is protecting consumers and saving them money.

1. No more surprise interest rate increases

Credit card issuers must give 45 days' notice for most significant account changes. The notice requirement does not apply to credit limit changes, unless the change would trigger a penalty such as an over limit fee. If consumers do not agree to the impending change, they may opt out, close their account and pay off the balance pursuant to their original agreement. Check out our previous blog about calculating credit card interest here.

2. Limiting Universal Default

In the past, credit issuers were able to increase interest rates on consumers based on their payment records of other unrelated credit lines, this practice is known as "universal default" and is now prohibited for existing credit balances. It is allowed on future credit balances if 45 days' notice of the change is provided. However, as discussed above, consumers may opt out.

3. Elimination of certain fees

Charging fees to pay bills, regardless of the method of payment used, is now prohibited. Late fees have been capped at $25.00 but may increase for cardholders who pay late more than once in a six-month period. Consumers can elect the ability to go over credit limits for a fee, however, the fee is prohibited if finance charges lead to exceeding the credit limit.

4. Limiting Credit and Promotions to young adults

Extending credit to anyone under the age of 21, unless they can show the capacity to pay or they have a co-signer, is prohibited. Soliciting young adults to apply for credit cards by offering goods such as t-shirts is prohibited on college campuses and is limited to at least 1000 feet away from campuses.

5. Payoff math helps consumers take control of outstanding balances

Credit card statements must disclose the amount of time it would take to pay off balances by making the minimum payments. Statements must also provide the amount the consumer should pay if they wish to pay off the balances in 36 months, these calculations must include interest. Check out our previous blog about credit card statements here.

Even with all changes implemented by the CARD Act, we understand that life happens and sometimes debt can spiral out of control. If you need assistance defending yourself against creditors, contact us for a free consultation.