by Joseph Kenny | 01/20/10

You have probably read bits and pieces about the Credit Card Accountability Responsibility and Disclosure (C.A.R.D.) Act of 2009. Much of the news about the Act has addressed actions by banks and financial institutions to preempt the new law by raising and changing current fees.

The law does not go into effect until 22-February-2010. Congress is debating whether to move its implementation up in response to bank actions.

The new legislation covers a lot of territory. Following is a summary of its major provisions.

On new accounts, interest rates and fees cannot be raised the first year when the account is opened with a fixed rate. Rates can change on accounts with a variable indexed interest rate. They can also be raised at the end of a promotional period if that period is at least 6 months.

Another important change is that interest rates and fees cannot be raised until a minimum payment is 60 days past due. The consumer will get a minimum 45 days advance notice and the right to cancel the card. On top of that, the higher rates will revert back if there are 6 months of on-time payments.

The new rules also limit when interest rates can be raised on existing accounts. In a similar fashion as on new accounts, interest rates can only be raised on existing balances when there is a variable rate, at the end of a promotional period, and if a minimum payment is 60 days late. Once again, rate changes require 45 days advance notice.

When a bank is permitted to raise future interest rates there must always be 45 days advance notice given to the card holder. The card holder has the right to cancel the account upon notice. Under any condition, if the consumer cancels the account he or she will not be considered in default. Also, the credit card company cannot require immediate and full payment and must meet legislated conditions concerning minimum payments and length of time to repay the account in full.

The Credit CARD Act addresses fees and penalties on credit card accounts too. Over-limit fees can no longer be charged unless the card holder gives express permission. The fee may only be charged once per billing period providing relief for people who have had multiple over-limit fees from debit card charges drive account balances up. Late fees and over-limit fees must be reasonable and reasonable will be determined by the Federal Reserve Board.

Double cycle billing is prohibited. Payment allocation must be structured so that balances with the highest interest rates are paid down first. There are required disclosure rules that force credit card companies to inform consumers how long it will take to pay off the account at the current interest rate and if only minimum payments are made.

Payment due dates must allow at least 21 days for payment after mailing of the credit card statement. Payments must be posted on the date of receipt. The payment due dates must be consistent from month to month. Payments at branch offices must be credited to the account on the day the payment is received.

Even consumers under 21 years old are included in the law. This is because college students have been particularly vulnerable to credit card marketing activities only to find themselves owing thousands on credit cards. The law requires anyone under 21 years old to obtain a co-signer who is over 21 years old. If there is no co-signer, the consumer must prove there is a way to make payments.

As for marketing to consumers under 21 years old – credit card companies cannot offer gifts to students on campus in exchange for completing applications.

There are many other requirements in the Credit CARD act that impact both card issuers and credit card holders. The ones described are just the most important ones affecting all credit card holders. Consumers are anxious for this law to take effect because it’s easy to see that the days of unbridled fees and charges imposed by credit card companies are ended.