New Protections for Credit Cardholders Take Effect Monday

“I strongly supported passing the Credit CARD Act, also known as the Credit Cardholders’ Bill of Rights, because consumers need relief from the abusive billing practices of the credit card industry,” Congressman Cohen said. “The changes that go into effect on Monday will hold credit card companies more accountable, while providing tough new protections for consumers.”

The provisions of the Credit CARD Act that take effect on Monday will:

• Prohibit arbitrary interest rate increases and universal default on existing balances;
• Prohibit issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions, and also limits over-limit fees on electing cardholders;
• Require payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
• Prohibit issuers from setting early morning deadlines for credit card payments;
• Prohibit interest charges on debt paid on time (double-cycle billing ban);
• Require issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended; and,
• Protect recipients of gift cards by requiring all gift cards to have at least a five-year life span, and eliminates the practice of declining values and hidden fees for those cards not used within a reasonable period of time.

Several provisions went into effect on August 20, 2009. These include: written notices to consumers of any increases in the interest rate or otherwise makes a significant change to the terms of a credit card account; the right to cancel a card before any rate hike goes into effect; and, requiring billing statements to consumers 21 days before the due date of any payments.

Several provisions will go into effect on August 22, 2010. These include requirements that that penalty fees to be reasonable and proportional to the omission or violation, and that creditors periodically review all interest rate increases since January 2009 and reduce rates when a review indicates that a reduction is warranted. Additionally, provisions that limit dormancy, inactivity, and service fees associated with gift cards go into effect.

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________________________
Steven Broderick
Communications Director
Congressman Steve Cohen (TN-9)
1005 Longworth House Office Building
Washington, DC 20515
Direct: 202-226-7916
Main: 202-225-3265
steven.broderick@mail.house.gov