May 20, 2009
CARD Act Cracks Down on Exorbitant Fees and Interest Rates
Senator Jim Webb (D-VA) announced he supports the Senate passage of legislation to protect consumers and crack down on unfair and deceptive credit card company practices that result in undisclosed fees and rate increases. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the “CARD Act”) passed with bipartisan Senate support.
“The CARD Act is focused on improving corporate accountability and protecting consumers from the unacceptable practices of credit card companies that have gone unchecked for too long,” said Senator Webb. “While consumers must take responsibility for their financial decisions, the credit card industry has an equal responsibility to be fair to its customers.”
Over the last two decades, credit card use has skyrocketed, leaving the average cardholder with a debt of about $7,300. This financial burden is being compounded by a variety of fees and interest rate practices used by the credit card industry, leaving many families and individuals struggling to pay their debts.
The CARD Act remedies unfair and deceptive industry practices. Provisions include:
- Enhancing protections against excessive fees on low-credit, high fee credit cards;
- Prohibiting credit card issuers from increasing rates on cardholders in the first year after a credit card account is opened;
- Protecting young consumers targeted by aggressive and irresponsible credit card marketing offers;
- Requiring payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
- Ensuring that rate increases on delinquent accounts are only permitted after 60 days and that issuers readjust to the original interest rate following on time minimum payments;
- Prohibiting interest charges on debt paid on time (double cycle billing ban);
- Prohibiting late fees if the card issuer delayed crediting the payment;
- Requiring issuers to provide individual consumer account information and to disclose the period of time and total interest it will take to pay off the card balance if only minimum monthly payments are made;
- Requiring full disclosure in billing statements of payment due dates and applicable late payment penalties;
- Increasing penalties for credit card companies that violate the Truth in Lending Act; and
- Protecting recipients of gift cards.
