The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 is a landmark piece of legislation enacted in the United States to address and curb abusive practices by credit card companies. Signed into law by President Barack Obama, it provides significant protections for consumers against unfair fees, deceptive interest rates adjustments, and other exploitative behaviors. The Act was fully implemented in February 2010.
Key Provisions
Interest Rate Increases
The CARD Act restricts credit card issuers from increasing interest rates on existing balances unless the consumer:
- Is more than 60 days late on payments.
- Is on an introductory or promotional APR that has ended.
- Experiencing a significant change in indexed interest rates.
Disclosure and Billing Practices
The legislation mandates transparency in billing and disclosures, stipulating that issuers must:
- Send statements 21 days before the payment due date.
- Provide clear and noticeable warnings about the costs of making only minimum payments.
Fee Restrictions
The Act places limitations on fees, including:
- Prohibition of over-limit fees unless the consumer has opted into over-limit transactions.
- Restrictions on the frequency and amount of late fees.
Underage Protections
The CARD Act includes protections for young consumers by:
- Requiring co-signers for applicants under 21 years of age unless they can demonstrate a means of repaying the debt.
- Ensuring marketing practices on college campuses are regulated.
Examples of Consumer Protections
- A consumer will not see sudden, unannounced increases in interest rates on their existing credit card debt.
- Clearer breakdowns of fees and interest charges on monthly statements, making it easier for consumers to understand their financial obligations.
- Fewer unexpected fees, promoting fairer treatment and greater financial stability for cardholders.
Historical Context
The CARD Act was introduced in response to growing concerns about the credit card industry’s practices during the financial crisis of 2007-2008. It reflects a broader effort to enhance consumer protection and financial stability in the wake of widespread financial distress.
Applicability
The CARD Act applies to all credit card issuers operating within the United States, covering a wide range of credit card practices. Consumers of all demographics benefit from its provisions, especially younger adults who are new to credit.
Comparisons
While similar protections exist in other jurisdictions, such as the European Union’s Consumer Credit Directive, the CARD Act is particularly comprehensive in its scope and enforcement mechanisms.
Related Terms
- APR (Annual Percentage Rate): The annual rate charged for borrowing or earned through an investment.
- Grace Period: A period after the due date during which no late fees will be charged.
- Minimum Payment: The lowest amount a consumer must pay to keep their account in good standing.
- Credit Utilization Ratio: The ratio of a cardholder’s credit card balances to credit limits.
FAQs
How does the CARD Act impact credit card rewards programs?
Do the protections of the CARD Act apply to business credit cards?
References
- U.S. Senate Bill S.414: The Credit CARD Act of 2009. Congress.gov.
- Federal Reserve Consumer Credit Law Quick Reference for Compliance.
Summary
The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 is crucial legislation aimed at protecting consumers from unfair credit card practices. By mandating greater transparency, restricting excessive fees, and ensuring fair interest rate adjustments, the CARD Act plays an essential role in fostering a more secure and equitable financial environment for all credit card users.
