New credit card provisions in US CARD Act

If you are a credit card user in the US, it is time that you understand the new laws regarding credit cards, especially in view of the CARD Act (Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009) that becomes effective immediately. Not all of the new rules, but only a few key provisions are becoming effective this Thursday. The rest of the provisions will be effective only next year.

One of the provisions that become effective immediately is that making it obligatory on creditors to issue 45 days’ written notice to consumers before increasing interest rates or making major changes in the account terms. This 45 days notice is to replace the existing 15 days notice. In the same notice the consumers should be informed of their right to cancel the credit card account before the changes become effective or binding on them.

Another significant new rule is that creditors must mail or deliver account statements to the consumers at least 21 days before the payments become due. This requirement is applicable to credit cards and other open-end consumer credit accounts. From February 2010 the due dates must be same day of every month. If such due date for payment falls on days when payments are not accepted (like weekends or holidays), creditors must accept payment on the next day and such payments cannot be treated as late payments or delayed payments.

Ironically some of the laws that squeeze the consumers remain unchanged. For example, though companies can offer fixed rates, they have the right to change the rates, as you see printed on your account statements. Most consumers are unaware of it and its consequences on their accounts.

The credit card companies used to do many things in their interest like moving the due dates, allowing over limits and overcharging for them, hiking interest rates, and similar practices. Though credit card holders had grouses, they continued with the companies, because they either never bothered to find out better options, or canceling an account and opening with another credit card company meant the same as they too were operating under the same rules.

The new rules are becoming operative when many cardholders are frustrated with credit card companies. In a new survey conducted by Consumer Action, credit card users said that their interest rates are shooting up, minimum payments are rising and credit limits are being cut. This included high interest rates on purchases and cash advances “up to three percentage points between March and June”. Even cardholders paying dues well in time were “being subjected to costly, unilateral increases”, the survey showed.

Under the new CARD Act, credit card companies or card issuers cannot raise interest rates on existing balances except under certain agreed conditions, like if the card carries a variable interest rate. Also the credit card issuers cannot be arbitrary about changing terms. For more information on the new credit card rules you can log on to http://www.consumer-action.org and type ‘new credit card provisions’ in the search box.