New credit card protections take effect Feb. 22, and to help you understand the key changes, we have outlined what credit cards were like before the new law (the Credit CARD Act) and how they’re different now.

Rate increases

BEFORE THE CARD ACT: Credit card companies could increase your interest rate at any time for any reason.

NOW: In general, credit card companies can’t increase your rates within the first year after you open a new account. They also can’t increase the rate to an existing credit card balance. If they do plan to increase your rate, they must give you a 45-day notice and the opportunity to cancel the card.

Universal default

BEFORE: In a practice called universal default, credit card companies could up your card’s interest rate if you were late on other separate payments, such as your utility bills or cell phone bill.

NOW: This practice is illegal; credit card companies can’t raise the rate you pay on a credit card because of the way you pay other bills.

Over-the-limit fees

BEFORE: Credit card companies could tack on an extra fee if you went over your credit card limit, even if you didn’t intend to go over the limit. For example, you could get a $30 fee for charging $8,009 on an $8,000-limit credit card.

NOW: You must opt-in if you want to accept over-the-limit fees and the ability to charge more than your limit. Without your approval, credit card companies can’t allow you to charge more than your limit and then assess a fee.

Credit cards for consumers under 21

BEFORE: Credit card companies could issue credit cards to young consumers regardless of their income or ability to pay for the card.

NOW: Now, credit card companies can’t issue credit cards to consumers under 21 years old unless the consumer demonstrates the ability to pay or has a co-signer, such as a parent, guardian or spouse.

Payment allocation

BEFORE: Credit card companies could charge you interest over two billing cycles (“double billing”), penalizing even those consumers who paid off their balances. Plus, if you had multiple balances with different interest rates, your credit card company could allocate your payments to the lower-rate balance first, meaning you would continue to pay more in interest for carrying the higher-rate balance.

NOW: Credit card providers must allocate your payments fairly. They can only impose interest charges for the current billing cycle (no double billing), and if you make more than the minimum payment on your credit card bill, they can’t allocate payments to the lowest interest rate balances first.

The Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act) was passed by Congress and signed by the president in 2009. In January, the Federal Reserve finalized rules for implementing the law. Most major provisions take effect Feb. 22, but some additional protections will begin this summer.

For more information on the new credit card regulations, visit the consumer information page on the Federal Reserve’s Web site, www.federalreserve.gov.

Links:
New credit card protections: consumer information – Federal Reserve
www.federalreserve.gov

Check out consumer publications – Ohio Attorney General’s Office
www.ohioattorneygeneral.gov/Files/Publications

How do I check my credit report? – Ohio Attorney General’s Office
www.ohioattorneygeneral.gov/SpeakOutOhio/Blog/February-2009/How-do-I-check-my-Credit-Report- 

Tags:
Credit cards, consumer law, CARD Act
 

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