NEWS RELEASE
Feb. 19, 2010
ABA Media Contact: Peter Garuccio    
(202) 663-5452
E-mail: pgarucci@aba.com

CONSUMERS EMPOWERED BY NEW CREDIT CARD LAW TAKING EFFECT MONDAY

WASHINGTON – Credit card customers will benefit from sweeping new protections beginning Monday, February 22 as the bulk of the rules implementing the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 take effect.  These new rules signal the beginning of a new era of empowerment for card customers, and cover a wide range of issues of concern to consumers and policymakers.

“The rules taking effect on Monday are the most important step in an ongoing process that will increase protections and make card terms more predictable and manageable for customers,” said Kenneth J. Clayton, senior vice president and general counsel for ABA card policy.  “Consumers are really placed in the driver’s seat by these new rules.”

The protections taking effect on Monday are the second round of sweeping provisions under the CARD Act to go into effect.  The first round of new protections took effect last August when customers were empowered to decline significant changes in terms to their credit card agreements, including interest rate increases, and issuers were required to mail billing statements 21-days before the due date.  The new changes ensure that consumers will benefit from important new protections in four key areas:

  • The new law ends confusing billing practices, instituting new rules that are easier to understand.
    • Payments will be applied to highest interest rate balances first, helping customers pay off their balances faster and more cheaply;
    • Due dates will be the same every month; confusing cut off times for receipt of payments will be eliminated;
    • So called “double-cycle billing” is completely eliminated.
  • Customers get even greater protections from interest rate increases.
    • As part of this process, customers are already able to reject interest rate increases;
    • Now, nearly all interest rate increases on outstanding balances will be prohibited (with very limited exceptions); 
    • There will be no interest rate increases for the first year any account is open; 
    • Interest rate increases for future charges will not happen without prior notice of 45 days.
  • The new law restricts certain fees.
    • There will be no over the limit fees unless the customer actively “opts-in” to this service;
    • Credit card companies will not impose fees for the manner in which customers pay their bills (for example, by phone); 
    • Upfront subprime card fees are dramatically limited.
  • Young people who use credit cards will be protected by additional rules.
    • Customers under 21 years old will be required to show they have the means to pay off their debt or have a cosigner; 
    • The new law restricts the marketing of credit cards on college campuses. 

“What we’re seeing with these new rules is the elimination of many practices that frustrated credit card customers and the start of a new era where customers will have greater choice, control and predictability in managing their credit card accounts,” said Clayton.  “The bottom line is this: the credit card industry is changing and these new rules will help empower consumers to take control of their personal finances.”

While these provisions do represent the bulk of the reforms under the CARD Act, rules to improve customer disclosures take effect this July, followed by further new protections taking effect this August.

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The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen America’s economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry’s $13.3 trillion in assets and employ over 2 million men and women.