DODD: WATCH FOR NEW CREDIT CARD PROTECTIONS
Sweeping New Credit CARD Act Rules to Protect Consumers Take Effect Monday
February 19, 2010
WASHINGTON – Today, Senate Banking Committee Chairman Chris Dodd (D-CT) reminded consumers to look for important new credit card protections on Monday when major provisions of Credit CARD Act take effect.
These provisions will stop unfair interest rate hikes and changes in terms, prohibit exorbitant and unnecessary fees, defend the rights of responsible credit card users, and protect young consumers against aggressive credit card solicitations.
“Starting Monday, credit card customers will see an end to many abusive practices that have driven Americans into debt,” said Dodd. “Customers need to act responsibly. In turn, they deserve to be treated fairly.”
According to a recent study by the Pew Safe Credit Cards Project
, these new rules will save consumers billions of dollars. Just two of the abuses addressed by the Credit CARD Act – rate hikes on existing balances and penalty interest rates – were costing Americans more than $10 billion a year.
“I urge consumers to learn more about these significant new protections, and keep a close eye on their credit card statements,” Dodd continued. “Make sure credit card companies are giving you 45 days notice if they’re going to change your terms. If you don’t like the new terms, shop around for a better deal and exercise your new right to opt-out of the changes.”
Having fought to reform the credit card industry for over two decades, Dodd wrote the Credit Card Accountability, Responsibility and Disclosure Act, a version of which he introduced in 2004, to provide tough new protections for the millions of consumers who are treated unfairly by their credit card companies. His legislation was signed by President Obama
last year and provisions giving consumers advanced notice of changes in account terms and more time to pay bills took effect in August
A summary of the new rules is below and attached:
What the Credit Card Act Means for Consumers
On February 22, sweeping new rules to protect American consumers from abusive credit card practices will go into effect. Required by Senator Chris Dodd’s Credit Card Accountability, Responsibility, and Disclosure Act, these new regulations will put an end to the deceptive and unfair practices that have driven many families into debt and establish clear new rules of the road to give consumers the information they need to make educated decisions when it comes to their credit cards.
What American consumers can expect under the Credit CARD Act:
UNFAIR INTEREST RATE HIKES PREVENTED
· Interest rate hikes on existing balances will be prohibited unless the cardholder is more than 60 days late in making a payment.
· Universal default, the practice of raising interest rates on customers if they are late paying an unrelated bill such as a car loan or a utility bill, will be prohibited for existing balances.
· Teaser rates will be required to last for at least 6 months, and credit card companies will be prohibited from increasing rates in the first year after a credit card account is opened.
CLEAR RULES OF THE ROAD
· Billing statements will clearly display payment due dates and late payment penalties, and credit card agreements must be posted on the company’s websites.
· Monthly statements will also warn cardholders about how long it will take them to pay off their balances if they only make the minimum payments.
· Credit card companies will be required to notify cardholders 45 days before changing terms of their accounts, giving cardholders time to shop around for a better deal and opt-out of the changes, and allowing cardholders to close their accounts and pay off the balance under their current terms. Cardholders will generally have at least five years to pay off the balance.
FAIR PAYMENT PRACTICES
· Statements must be mailed out 21 days prior to the bill’s due date.
· Credit card companies will no longer be able to set early morning or other arbitrary deadlines for payments.
· Any payments in excess of the minimum payment must be applied to the customer’s credit card balance with the highest interest rate, rather than applying payments to customer’s balance with the lowest interest rate as many companies currently do to rake in greater profits.
· Card companies will generally be prohibited from charging fees to pay bills by mail, telephone, or electronic transfer.
· Penalty fees will be reasonable and proportional to the omission or violation.
· Customers will be able to choose whether or not they want over-the-limit fees on their account. Those who do not opt for these fees will have transactions rejected if they exceed their credit limit.
NEW PROTECTION FOR YOUNG ADULTS
· For applicants under 21, credit card companies will be required to obtain an application that contains the signature of a parent or guardian or information showing that the applicant has the financial resources to repay the debt.
· Card companies will be prohibited from offering free gifts in exchange for credit card applications on college campuses, cracking down on misleading marketing tactics.