May 27, 2009
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CARD Act of 2009, Pt.2
Unfair Rates and Fees.The CARD Act will ban unfair rate increases as follows:
· Prohibits retroactive rate increases on existing credit card balances due to "any time, any reason" or "universal default" and strictly prohibits retroactive rate increases due to late payments.
· The Act provides consumer protection with "First Year Protection" which states that contract terms and conditions must be clearly written and remain stable throughout the entire first year of the account opening. Credit card companies may continue to market special promotional rates with new accounts as well as all other accounts; however, these rates must be clearly communicated and must remain in place for a minimum of six months.The CARD Act will ban unfair fee traps as follows:
· Ban Late Fee Traps: Financial Institutions must give credit card customers at least 21 calendar days from the date the account statement is mailed out before the payment is due. Additionally, the Act prohibits lenders from charging late fee traps resulting from payment deadlines with due dates that varying from month to month, are scheduled on weekend days, or fall in the middle of the day.
· Demands Fair Interest Calculation: Credit card companies must apply any excess payment over the minimum payment due to the highest interest rate balance first. The Act puts an end to "double-cycle" billing where a lender calculates interest for the current month off the balance of the previous month.
· Requires lenders to give consumers the ability to opt out of over-the-limit charges that would initiate fees by requiring financial institutions obtain the consumer's permission before approving these credit card transactions.
· Curtails unfair sub-prime fees on accounts with low limits that are generally issued to lower economic or low credit score consumers that have difficulty getting approval for lower interest rate credit card accounts.
· Retrains fees and improves terms on gift cards and stored value cards. The Act restricts "inactivity" fees unless at least 12 months has lapsed with no activity.