The Credit Card Accountability, Responsibility and Disclosure Act, H.R. 627 became law on May 22, 2009. In light of the bill’s passage in the House with an overwhelming bipartisan majority, Congressman John Lewis recently issued a statement explaining why he favors the legislation. “We want businesses to prosper in our economy,” shares Lewis, “but not because they have an unfair advantage. Before Congress passed this legislation, credit cardholders had no protection against unwarranted fee[s] and interest rate hikes that drive them deeper into debt. This legislation levels the playing field so that consumers can still use the benefits of credit, but they also have a reasonable chance to pay off their bills and get out of debt.”
The credit cardholder’s bill of rights doesn’t go into effect until February 2010, so consumers need to anticipate changes that will take place over the course of the next eight months. Some credit card issuers are sure to institute changes before next winter.
Here are the major provisions:
-Prohibits arbitrary interest rate increases on existing balances, unless the consumer is 60 days late on a payment or fails to comply with a repayment agreement.
-Eliminates “universal default,” in which card issuers raise interest rates because of late payments or default with other creditors — even if the cardholder is in good standing with the card in question.
-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 issuers from increasing rates on a cardholder in the first year a credit card account is opened; and
-Requires promotional rates to last at least six months.
“In our efforts to rebuild this economy,” Lewis continues, “American families are being forced to tighten their belts. Through this bill, we are also mandating that the credit card industry do the same. We are trying to put an end to unchecked financial growth that puts our entire economy at risk. We want to encourage real growth that puts resources back in people’s pockets and represents solid financial growth in the corporate sector.”
In the meantime, consumers are encouraged to protect themselves by reading all statements and disclosures and to be on the lookout for retroactive interest rates. They’re also advised to redeem rewards and rebates and check credit card limits — companies are lowering spending limits without notifying consumers in advance. –yvette caslin
