The CARD Act of 2009 gives consumers who use credit cards and gift cards many protections.
Advance Notice of Changes in an Account
A card issuer must give a consumer written notice at least 45 days prior to major changes in credit card terms. This includes the benefits and rewards structure of a credit card.
Interest rates
- Retroactive interest rate increases are banned except when a cardholder is more than 60 days late paying a credit card bill.
- The interest rate cannot be increased within the first 12 months; and
- Promotional rates must have a minimum of six months in duration.
Fees and “Upcharges”
- A credit card issuer must review the cardholder’s account six months after increasing the interest rate and return the APR to the previous lower level if cardholder payment has been on time.
- Universal default (declaring a default on a timely paid credit card because you are in default on another debt) and doublecycle billing (calculating the average daily balance every 2 months instead of monthly) are no longer allowed.
- “Over credit limit” fees are now prohibited unless consumers specifically agree to allow transaction to go through instead of being denied. Billing Cycles
- Bills must be sent out no later than 21 days before the due date.
- Payments a cardholder makes must be credited as on-time if received by 5 P.M. on the due date.
Enhanced Disclosures for Consumer
- Clear disclosure on how long it will take to pay off a credit card balance if cardholder makes only the minimum payment each month.
- Clear disclosure on the total cost in interest and principal payments if a cardholder makes only the minimum payment each month.
- Late payment deadline and postmark date are required to be clearly shown and disclosed to cardholders.
Protection of Young Consumers
- Credit cards cannot be issued to people under the age of 21 unless an adult cosigner signs or the young consumer can prove he or she has the means to repay the debt (proof of reasonable income).
- College students will have to get permission from parents or guardians in order to increase the credit limit on joint accounts held with those adults.
- People under the age of 21 will now be protected from pre-screened credit card offers unless they specifically opt-in for offers.
Gift Card Rules
- Gift cards are now required to remain active for at least five years from the day of their activation.
- Dormancy or inactivity fees on gift cards can no longer be imposed unless there has been no activity in a 12-month period.
- Dormancy or inactivity fees must be clearly disclosed to gift card buyers.
- If the gift card expires after 5 years, the terms of expiration needs to be clearly disclosed to gift card buyers.