Credit Card Regulations in the U.S.A.

The Credit Card Reform Act of 2009 has changed the credit industry.

The Credit Card Reform Act of 2009 changed how creditors conduct business in the US. The legislation created crediting regulations designed to protect consumers from unfair credit card practices. It provides guidelines for full disclosure in credit contracts and focuses on specific credit areas, including credit contract terms, rate increases and credit fees.

Adults Under 21

The Credit Card Reform Act of 2009 limits credit card access among adults under the age of 21 by banning the distribution of credit card applications. The act bans creditors from soliciting at universities. They can no longer hold college events to collect credit applicants. Adults under the age of 21 cannot get credit approval unless the credit loan application has a co-signer who is over 21 years old.

Credit Information

The Credit Card Act of 2009 has instituted “plain language” disclosure regulations. Creditors must provide contract information in simple terms that anyone can understand and provide public access to credit card contracts. Creditors must provide this information on request or allow access to it via a website.

New disclosure regulations force creditors to disclose the financial consequences concerning defaults and late payments in plain language. Credit card statements must now display pay-off schedules based upon the interest rate and minimum payment. The full disclosure regulations also require creditors to show the total interest costs involved when paying the required minimum.

Interest Increases

The credit card reform act banned arbitrary interest rate hikes on existing balances. Late payment rate increases are restricted and consumers must be notified prior to any rate increase.

The act instituted an “Opt-out” clause that allows consumers to refuse rate hikes by closing accounts and paying off existing balances at the original interest rate. Promotional rate programs must have their terms clearly disclosed and interest terms must last six months.

Credit Costs

The Credit Card Reform Act of 2009 bans late-fee traps and regulates how creditors calculate interest rates. According to the act, creditors must give cardholders “a reasonable time to pay” their monthly bill. Creditors are required to give consumers 21 calendar days from the time of mailing. Regulations also restrict late-fee traps such as weekend deadlines, changing due dates and deadline submission times that fall in the middle of a billing day.

References

• The White House: Reforms to Protect American Credit Card Holders Fact Sheet
• Department of the Treasury, Office of Thrift Supervision: Key Provisions of Credit Card Accountability Responsibility and Disclosure Act of 2009
• GovTrack: The Congressional Text of Bill S362 The Credit Card Reform Act of 2009
• "USA Today"; Obama Signs into Law Credit Card Reform; Kathy Chu; May 22, 2009