On May 22, 2009, President Obama signed into law the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, also known as the Credit CARD Act of 2009. [Pub Law No 111-24, HR 627.] Its primary purpose is to amend the Truth in Lending Act to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan. The majority of provisions took effect in February 2010, while certain advance-notice provisions took effect 90 days after enactment. Some of the changes made by the Act include the following:
- Prohibits retroactive increases of the interest rate except when a cardholder is more than 60 days late in payment.
- Prohibits increasing interest rates within the first 12 months, and requires promotional rates to last a minimum of six months.
- Requires issuer to review cardholder’s account six months after increasing the interest rate, and to reset the previous lower APR if payments have been timely.
- Requires 45-days’ advance notice before making significant changes to credit card terms.
- Prohibits double-cycle billing (calculating finance charges using the average daily balance for current and previous billing cycles) and universal defaults (hiking rates when a late payment is made on any other account).
- Requires clear disclosures on how long it will take to pay off the balance if the cardholder makes minimum payments.
- Requires that persons under the age of 21 have an adult co-signer or show proof of means to repay the debt.
- Requires gift cards to remain active for at least five years, and prohibits dormancy fees unless there has been no activity for 12 months.