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Educational Consumer Tips

Credit Card Accountability, Responsibility and Disclosure (CARD) Act

Author: Better Business Bureau
Category: Finance

Beginning in February 2010, new legislation regarding your rights as a credit card holder go into effect. The following is a summary of your rights under the CARD Act.

Requires a creditor to provide written notice not later than 45 days prior to the effective date of: (1) any increase in an annual percentage rate (APR); and (2) any significant change, as determined by rule of the Federal Reserve Board, in the terms of the cardholder agreement (including an increase in fees or finance charges).


Prohibits a creditor from increasing any annual percentage rate (APR) of interest, fee, or finance charge applicable to the existing balance on an open end consumer credit card account unless specified conditions are met.


Allows a creditor to increase an APR, fee, or finance charge only if the increase is due solely to: (1) expiration of a specified time period (e.g., promotional period) disclosed clearly and conspicuously to the consumer before commencement of the time period; (2) a change in index not under the creditor's control; (3) payment not received during the 30-day grace period after the due date; or (4) completion of a workout or temporary hardship arrangement, or the consumer's failure to comply with such an arrangement.


Prohibits any APR increase relating to such an arrangement from exceeding the APR applicable to the particular category of transactions on the day before the effective date of the arrangement.


 Prohibits a creditor from changing the terms governing repayment of an outstanding balance; but permits the creditor to provide the obligor with specified repayment methods.


Requires a creditor that increases the APR based upon factors including the obligor's credit risk, market conditions, or other factors to: (1) consider changes in such factors in subsequently determining whether to reduce the APR for such obligor; and (2) reduce the APR when a review indicates a reduction.


Declares that no increase in any APR, fee, or finance charge, with certain exceptions, shall be effective before the end of the one-year period beginning on the date on which the account is opened.


States that, in the case of a promotional rate, no written notice of an increase in the APR shall be effective before the end of a six-month period beginning from the date the promotional rate takes effect.


Prohibits imposition of a finance charge, with certain exceptions, upon a credit card account balance that is based on balances for days in billing cycles proceeding the most recent billing cycle (double billing cycle) as a result of the loss of any grace period.


Prohibits penalties for on-time payments.


Prohibits the charge of an over-the-limit fee unless the consumer expressly permits the creditor to complete the relevant transaction (opt-in).


Allows imposition of an over-the-limit fee only once during a billing cycle.


Prohibits its imposition more than once in two subsequent billing cycles with respect to such excess credit, unless the consumer: (1) has obtained an additional extension of credit in excess of the credit limit during any such subsequent cycle; or (2) reduces the outstanding balance below the credit limit as of the end of such billing cycle.


Prohibits a creditor from imposing a separate fee related to the method of payment (by mail, electronic transfer, telephone authorization, or other means), unless the payment involves an expedited service by the creditor's service representative.


Requires any penalty fee or charge to be reasonable and proportional to the omission or violation involved.


 Requires a card issuer, upon receipt of payment, to apply amounts in excess of the minimum payment amount first to the balance bearing the highest rate of interest, and then to each successive balance bearing the next highest rate of interest, until the payment is exhausted.


 Requires a creditor to allocate the entire amount paid in excess of the minimum payment to a balance on which interest is deferred during the last two billing cycles immediately preceding the expiration of the period during which interest is deferred.


 Prohibits a card issuer from imposing any late fee or finance charge for a late payment if: (1) the issuer makes a material change in the mailing address, office, or procedures for handling cardholder payments; and (2) such change causes a material delay in the crediting of payment made during the 60-day period following the date on which such change took effect.


 Requires the payment due date to be the same day each month, or the next business day if such date falls on a weekend or holiday.


Requires each periodic statement of payment due to be mailed no later than 21 days before the payment due date.


Amends the Electronic Fund Transfer Act to declare unlawful: (1) the imposition of a dormancy fee, an inactivity charge or fee, or a service fee with respect to a gift certificate, store gift card, or general-use prepaid card; and (2) the sale or issuance of a gift certificate, store gift card, or general-use prepaid card that is subject to an expiration date.