Credit Card Act 2009 Slated to Take Affect Sooner

The Credit Card Act of 2009, passed by Congress and signed into law by President Obama in May 2009, has many consumer protections and provisions. The bill was slated to take effect in February 2010, but the House Financial Services Committee recently passed a bill to push the effective date to December 1, 2009. The bill’s sponsors, Carolyn Maloney D-NY and committee chairperson Barney Frank D-MA, wanted to move the effective date up to stop the banks that issue credit cards from squeezing the consumers with interest rate hikes and fees in anticipation of the new law.

Banks Concerned By Revised Timetable

Consumers have been struggling under difficult credit card rules, regulations and increasing rate hikes. Banks complain though that they can’t implement the required changes by the timetable required under the new bill. In general the entire credit industry would need to be reorganized to accommodate the new rules. Small credit card companies such as credit unions and community banks would not be affected by the date change since a smaller staff would make it easier  to meet the deadline. Larger credit issuers such as Citibank, Wells Fargo, American Express and Bank of America are being pushed to meet the date despite their concerns. Regardless, the bill was passed by the committee and will go for a vote on the floor of the House of Representatives soon. After the house votes it will go before the Senate and then to President Obama to sign into law.

Consumers can expect the following changes to credit card policy:

Proposed Rate, Terms, and Fees Changes: Limits how and why banks can increase interest rates on existing credit cards.

Late fees must be reasonable and related to the specific payment violation.

When interests rates are increased, the consumer may get the rates reduced if bills are paid on time for 6 months and the credit limit on the card is not exceeded.

Credit card companies must tell the consumer when major changes in the terms on his account change. Companies must give the consumer at least 45 days notice of the change and give him the choice to opt out or close the account if he does not agree to the changes.

New Rules in Marketing to Young Consumers Under 21 Years Old: To receive a credit card young consumer must show ability to repay a credit card debt through proof of income.

Must have an adult co-sign to get a credit card in their name credit card companies cannot offer young people gifts as incentives to sign up for one of their credit cards.

Clearer Account Explanations: Credit card companies must clearly explain all of the terms of a credit card account including payment dates, when late fees would be assessed, and how long it would take for account to be paid off if only minimum payment is made.

Congress to stay involved Federal agencies appointed by Congress would continue to study and review the credit card industry. The agencies would make further recommendations as needed to protect consumers.

Financial Education: Educational programs would be implemented in schools to teach children how to handle money, debt, and use credit cards wisely and become savvy consumers.

Time Will Tell

The Credit Card Act 2009 is the first attempt at credit card reform in decades. The banks claim that the new provisions will harm consumers and end up costing them more money in the long run. Congress and consumer advocacy groups however say that the reforms are needed to help consumers take charge of their financial lives.

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This entry was posted on Tuesday, November 24th, 2009 at 9:00 am and is filed under Credit Card News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.