Historic New Credit Card Rules Ban Tricks and Traps

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Elizabeth Weyant


Boston, Feb 22 – The Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act) bans hair-trigger interest rate increases and other unfair credit card practices. The Act goes into effect today and makes it illegal for credit card companies to profit by tricking customers into paying late and then tripling the interest rate on their balances. 

In addition to the rate-increase protection, the new law includes a number of measures that further protect consumers, including the creation of protections specifically aimed at college students and young people. Because of rising tuition and decreasing financial aid, more and more students are using credit cards, often graduating college with several thousand dollars of credit card debt. 

Among the new regulations, the law requires that credit card companies:
•    Stop tricking their customers into paying late and then dramatically increasing interest rates; credit card companies can’t increase interest rates on existing balances unless the current payment is 60 days late;
•    Disclose on each credit card statement how many months and years it will take to pay the current balance as well as the total interest if only the minimum payment is made;
•    Give 45 days advance notice of adverse changes in terms, and the right to opt-out before incurring new fees;
•    Stop handing out credit cards to students and young people who cannot prove that they have the ability to pay; and
•    Stop requiring that students fill out credit card applications as a condition of obtaining “free pizza” or cheap trinkets at on-campus marketing tables.

While the reforms brought by the new law will go a long way towards protecting consumers, more and better regulation is necessary. The creation of a new Consumer Financial Protection Agency (CFPA), passed by the House in January, faces intense attacks in the Senate.

“Bank fee tricks and traps became major problems because the current bank regulators not only didn’t enforce consumer laws, but also because they viewed the unfair fees as good for the banks that made tremendous amounts of money on the backs of consumers,” Weyant added. “This is the first time in more than 20 years any law opposed by credit card companies has passed.”