Certain provisions of the Credit Card Accountability and Responsibility and Disclosure Act (Credit CARD Act) that President Obama signed into law last year will go into effect on August 22, 2010. As that date approaches, the Federal Reserve has been announcing adjustments and modifications to prepare consumers.
A few such adjustments were announced this week. The final rule issued by the Fed (which amends Regulation Z, also known as the Truth in Lending Act) includes these provisions:
- Credit card issuers cannot charge more than $25 for late payments or other violations of an account’s terms unless a user has incurred prior fines or a higher fee constitutes a reasonable percentage of the transaction that caused the violation.
- Card issuers cannot charge fines or fees that exceed a card user’s payment. For transactions less than $25, the fee can equal up to the purchase amount.
- Issuers are no longer permitted to charge “inactivity” fees to penalize customers who do not use their accounts for a certain amount of time.
- Issuers can no longer charge multiple fines or fees for a single violation of the terms of the account (such as a late payment).
- Issuers that have increased rates since the beginning of 2009 must reevaluate whether the reason for the rate increase (such as a drop in credit score) still exists, and, if the reason no longer exists, to lower the interest rate.
A detailed, step-by-step look at the new regulations can be found at the Federal Reserve’s consumers page.
Other Changes to Note
The Fed also offers explanations of those changes that took effect on February 22 of this year. If you haven’t already noticed, these changes include:
- Advance notice of fee or interest rate increases: Card issuers are required to inform consumers at least 45 days in advance of such changes.
- Length of time to pay off a balance: This is a handy feature, since it clearly states how long it would take to pay off your debt making only the minimum payment. Your statement should also identify how much you need to pay each month in order to pay off your debt in three years.
- Application of increased interest rates: Should your credit card issuer increase your interest rate, it cannot apply the new rate to existing debt; only new purchases can be charged at that rate.
For a full examination of the changes, be sure to check out the Fed’s site. How are these changes affecting you? Leave your thoughts in the comments below.