Victory for Credit Cardholders

This is a big victory for students and all consumers! We've been working on this issue for a while now – working on campus to educate students and others about bad credit card practices, plus the report we issued last year, The Credit Card Trap.

Over the last ten years, credit card companies seeking even higher profits invented more and more unfair practices.

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 goes a long way toward reining in credit company abuses.

Listen to this news conference with U.S. PIRG's Ed Mierzwinski, Harvard Law Professor Elizabeth Warren and Univ. of Washington student leader Tim Mensing. Audio stream: http://bit.ly/aXkZH1

Highlights Of The Credit Card Accountability, Responsibility And Disclosure Act

For Students and Other Young People

New Credit CARD Act of 2009 offers special protections for college students and other young people.

The Credit CARD Act (Credit Card Accountability, Responsibility and Disclosure Act) will go into full effect on February 22, 2010. The new law shields all credit card holders from abusive bank and lending practices. The new law offers young adults additional special protections in response to complaints of aggressive bank marketing.

✔ Protections for 18-21 year old consumers.

Banks treated young adults differently than those older; they issued credit cards without verifying ability to pay, which left some young people mired in debt or trapped with bad credit due to non-payment. The new law treats young people the same, seeking proof of ability to pay or a co-signer.

Now, for those under 21, you must show that you can make payments in order to open a credit card account. The credit card company can look at a credit report or information provided, like information about wages from full or part-time or summer jobs, interest income or assets such as savings accounts or investments, and other sources of income, including alimony or public assistance.

✔ Protections for college students.

Credit card marketers offer “free” gifts like pizza and t-shirts, to students who fill out an application at on-campus tables. No more. Take the freebie, but they can’t force you to fill out an application for a card that you don’t want.

✔ Disclosure of college agreements with credit card companies.

Any college that has an exclusive agreement with a credit card company for an affinity credit card that displays the school mascot or name on it must disclose details of those contracts publicly, as will the credit card companies.

✔ Read More: What young adults should know about credit cards. (pdf)

For All Consumers

New Credit CARD Act of 2009 offers new protections for all consumers.

The Credit CARD Act goes into full effect on February 22, 2010 and shields all credit card holders from abusive, unfair bank and lending practices.

✔ Interest rate controls.

Banks charged penalty rate hikes up to 36% for a late payment on your card. Now, unless you are 60 days late, your rate on current balances cannot go up. Penalties can only apply to future charges on your card. Interest rates cannot increase for the first year unless the rate is variable, tied to an index; an introductory rate gives way to a higher, disclosed rate after 6 months; or you are 60 days late paying.

✔ Fair notice of rate and fee increases.

You must be notified 45 days in advance when the bank plans to increase your interest rate or other fees on your credit card. The bank must give you the option to cancel the card before certain fee increases take effect.

✔ Ban on unfair methods of billing.

The new law bans practices such as double-cycle billing. Now, interest can only be charged on your current balance, not on balances already paid off. It also requires that amounts paid above your minimum payment be applied more fairly to your higher-cost balances first.

✔ Fairer fees.

The new law prohibits credit card issuers from charging over-limit fees unless you choose to allow for over-limit transactions. It also requires penalty fees to be reasonable and proportional and provides a road map so that consumers whose rates go up due to violations can reinstate their preferred status by making regular payments.

✔ For information on additional changes, see the Federal Reserve Board's fact sheet for consumers.