Requirements of Credit Card Disclosures

Card companies must tell you when the terms of the agreement change.

Whenever you apply for a credit card, the credit-card company is obligated under federal law to provide you with the information you need to make an informed decision. If the company does not provide this, you have the right to demand they do so before you agree to the card or at any time while you still have the account.

Interest

One of the key laws governing credit-card disclosures is the federal Truth in Lending Act. This law, enacted in 1968, requires credit-card companies to explicitly, and in clear language, state how much the credit card charges in interest in terms of annual percentage rate, or APR, according to the Federal Reserve Board. APR is the amount of interest charged to any card balances over the course of the year.

Payments

The Truth in Lending Act also requires that the credit-card periodic billing statements include additional terms about payments. The statement must tell the consumer how long the card's grace period is; what, if any, membership fees cost; and how consumers can challenge or resolve errors in their statements. Also, apart from the APR, the statement has to indicate how much interest the person is actually charged in the form of a financing charge. This is the actual money charged to the consumer as a result of the interest rate being applied to the card balance.

Notices

The Credit Card Accountability Responsibility and Disclosure Act of 2009, commonly referred to as the CARD Act, requires a credit-card company to provide written notification of any policy changes to consumers at least 45 days before the changes take effect, according to the Federal Reserve Bank of Philadelphia. The card company must send such a notice whenever it changes interest rates or makes significant changes to the card policy.

Repayment Table

Section 226.7(b)(12) of the CARD Act also requires card companies to inform borrowers about their minimum payments and the effect that only making these payments will have. The company must disclose to consumers that only making the minimum payments will result in more interest being charged and longer times to pay off the account balance. The company must also include a repayment table in the card statement that estimates how long it will take to pay off the card with minimum payments.

References

• Federal Reserve Board: Credit Card Disclosures, Solicitations, and Privacy Notices: Survey Results of Consumer Knowledge and Behavior
• Federal Reserve Bank of Philadelphia: An Overview of the Regulation Z Rules Implementing the CARD Act