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Credit News
Credit Card Act of 2009
February 1st, 2014
Credit Card Act of 2009
By 1800CreditCards.com

Imagine you've recently been laid off of work, or have had an unexpected emergency occur that ate up the majority of your cash reserve. Whatever the reason, you suddenly find that you're unable to pay all your bills, and are consequently late on a credit card payment. While you may have only been a few days tardy, you dutifully paid any late charges that were assessed, as well as any miscellaneous fees that went along with your card's contract. However, after a couple of months go by, you receive a notice from your credit card company that you annual percentage rate has increased by 30%. After the anger and confusion have subsided, you wonder how you're ever going to be able to make your new minimum monthly payments, let alone how you're going to make any leeway against the principal with this new high APR.

According to Whitehouse.gov, 80% of Americans have hold at least one credit card, while 40% of these accounts carry revolving balances. Staggeringly, these same consumers are subjected to more than $15 billion in credit card penalty fees on an annual basis. Because of this, the Credit Card Act of 2009 was enacted to help the everyday credit card consumer.

The Credit Card Act of 2009

Signed into law by President Barack Obama on May 22, 2009, the Credit Card Act of 2009 into effect until February 22, 2010, and has 15 main points it addresses, all aimed at creating greater transparency and a more informed consumer.

These main points are:

1. To protect consumers against frivolous interest rate increases.
2. To prohibit negative actions against an account which has been paid in a timely manner.
3. To stipulate when a credit card bill must be mailed, and when payment can be accepted.
4. To provide straightforward and sensible terminology.
5. To allow consumers the option of setting their own credit limit.
6. To allow fair payment application.
7. To remove disproportionate account fees.
8. To limit consumer targeting by subprime credit cards.
9. To offer more complete Congressional oversight.
10. To offer clear explanation of minimum payments.
11. To stipulate new minimum age requirements.
12. To reign in credit card company participation on college campuses.
13. To allow easy access to consumer credit card agreements.
14. To regulate gift card fees.
15. To provide credit card counseling resource access.

1) To protect consumers against frivolous interest rate increases.

The Credit Card Act of 2009 enacted numerous guidelines regarding when a card issuer can increase a consumer's interest rate, and how interest rates can be applied. First, credit card companies must now give all consumers at least a 45-day notice prior to raising their interest rate. If the consumer chooses to do so, they can decline the increase, cancel their card and repay the existing balance based on the previous interest rate. In addition, credit card companies can no longer increase a cardholder's interest rate for activities unrelated to that specific account, and the terms of the account's contract cannot be capriciously changed.

2) To prohibit negative actions against an account which has been paid in a timely manner.

Card issuers must now review an account's activity every six months in order to determine if it qualifies for a rate decrease. In addition, if an account was subject to a rate increase due to late payments, the interest rate must be reduced back to its original amount once the consumer has applied six consecutive payments on time. Lastly, credit card companies must offer a grace period, during which time no interest can be applied on a balance that is paid in full in a timely manner.

3) To stipulate when a credit card bill must be mailed, and when payment can be accepted.

Credit card companies must mail bills to a consumer at least 21 days prior to the due date, which also must fall on the same day every month. If a payment is received late and the consumer can provide proof it was mailed at least seven days prior to the due date, then any late fees must be waived. If a consumer has any questions regarding their balance or payoff amount, a toll-free phone number should be clearly displayed.

4) To provide straightforward and sensible terminology.

The Credit Card Act of 2009, among other things, also stipulated that a single definition must be applied to any terms used in the contract. This prevents confusion between different issuers who may use terms in differing manners. In addition, contracts must contain larger fonts so the terms of the contract can be more easily read, and consumers have the right to reject a credit card prior to activating it without fearing any negative repercussions to their credit score.

5) To allow consumers the option of setting their own credit limit.

Consumers now have the ability to set a fixed credit limit on their card, which cannot be subject to over-the-limit fees.

6) To allow fair payment application.

Before the Credit Card Act of 2009 went into effect, credit card companies would apply any payments to the balances holding the lowest interest rates, which could be highly detrimental to accounts that had high interest transactions such as cash advances. Since being enacted however, card issuers can still apply the minimum payment to the balances with the lowest interest rates, but anything beyond the minimum payment must be applied to the balances with the highest interest rates.

7) To remove disproportionate account fees.

Credit card companies can now only charge penalty fees for exceeding a card's available credit limit over the course of three billing cycles. In addition, credit card companies cannot process an automatic payment, finance charge, annual fee, or "protection" or "insurance" plan that would cause the account to exceed its available limit.

8) To limit consumer targeting by subprime credit cards.

Cards such as these are usually targeted at consumers with little or no credit, or at those who have a poor credit rating due to charge-offs or bankruptcy. If a card issuer charges more than 25 percent in fees on an annual basis, these fees must be paid in full by the borrower before the card can be activated.

9) To offer more complete Congressional oversight.

Regulators are now responsible for collecting detailed data about the credit card industry, including profits, fees, rates and adherence to the law, which must then be presented to Congress on an annual basis.

10) To offer clear explanation of minimum payments.

Credit card issuers must now clearly present their cardholders with information such as their current interest rate, and how long it would take for them to pay off their balance if only minimum payment amounts continue to be applied. The new law also stipulates that bills must outline the minimum payment amount that would be required to pay off the debt over the course of three years.

11) To stipulate new minimum age requirements.

Prior to the Act going into law, the minimum age at which an individual could legally obtain a credit card in the United States was 18. However, this has now been increased to 21, the only exception for which is if the individual obtains a co-signer.

12) To reign in credit card company participation on college campuses.


Card issuers now must have a formal reason (such as event sponsorship) to actively market on college campuses. The Act also completely bans the use of gifts to lure college students into signing up.

13) To allow easy access to consumer credit card agreements.

The Act stipulates that credit card agreements are to be reviewed by the Federal Reserve on a quarterly basis. These agreements must also be available on the issuer's website, must be available should a cardholder call the company directly for a copy, using a toll free number posted plainly on each bill, and must be delivered within 30 days.

14) To regulate gift card fees.

Gift cards now have a minimum expiration period of no less than five years from the date of purchase. In addition, no "inactivity" fees can be charged against the balance unless a card has not been used for a minimum of 12 months.

15) To provide credit card counseling resource access.

On all consumer statements, card issuers must now provide a toll-free number for non-profit debt management counseling services.











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