Government Credit Card Rules
In February 2010, the Credit Card Accountability, Responsibility and Disclosure Act of 2009, more commonly known as the Credit CARD Act, went into effect. The act is a major addition to previous federal credit card regulations designed to protect consumers and give structure to the credit card industry. Credit card laws regulate practices such as raising interest rates and levying fees.
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Interest Rate Increases
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The Credit CARD Act limits when credit card companies can raise the annual interest rate on a cardholder's account. Existing balances cannot be raised unless a credit card borrower has fallen more than 60 days behind in payments. If this happens, the borrower can have their rate rolled back if they make six consecutive payments. Credit card companies can increase the interest rate on new balances but must give borrowers 45 days notice.
The new credit card regulations also eliminate the practice of a "universal default" on previous credit card balances. Previously, credit card companies could increase a cardholder's interest rate on past purchases based on issues relating to other, non-related creditors including utility companies, cable providers or other credit card providers. The new law only allows credit card companies to use universal default on new balances after giving cardholders 45 days of advance notice.
Over the Limit Fees
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Credit card companies have traditionally issued fees if customers make purchases which bring their total balance over their credit limits. The Credit CARD Act prohibits over the limit fees from being a mandatory part of a cardholder's agreement. Instead, individuals must opt in to have over the limit fees applied to their account. If they opt out, any purchase they attempt to make which brings their account over the limit will be rejected before it is completed.
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Debt Collection Practices
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Enacted in 1978 and amended in 1986, the Fair Debt Collection Practices Act places restrictions on the way that third-parties can attempt to collect overdue payments on behalf of creditors such as credit card companies. They are not allowed to use obscene language or threaten violence against a debtor. In addition, they cannot engage in a pattern of continual phone calls and can only call from 8 a.m. to 9 p.m.
Unauthorized Credit Card Use
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The Truth in Lending Act gives consumers protections against having their credit card used in a fraudulent manner if their card or information is stolen. Consumers are required to pay no more than $50 on any credit card transaction made fraudulently by a third-party before they have notified their credit card company that their information has been lost or stolen.
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- Photo Credit credit card and hand image by Warren Millar from Fotolia.com
