Credit cards can be confusing, frustrating and, in previous years, unfair to the consumer. The latest consumer-related credit law passed was in 2009, and it covered a wide amount of ground for debtors and debt collectors, as well as lenders.
It’s important to know as much as possible before applying for a credit card, as making an uninformed decision can often turn into a mistake. There are many laws set in place that are intended to protect you as a credit card consumer.
Fair Debt Collection Practices Act
Instituted in 1977, this law defends consumers against abuse from third-party collection agencies. They cannot call you multiple times per day, before 8 in the morning or 9 at night, nor at work if it is putting your job at risk. They are not able to make threats, or curse, and must inform you of your rights at the first call. Under this law, you have the right to confirm your debt.
The Truth in Lending Act & the Truth in Savings Act
Otherwise known as Regulation Z, this law was instituted in 1968. Under this act, all lenders and issuers are required to explain the terms, interest rate and other fees associated with the loan or credit line in a way that is easily understood by the consumer.
If a promotional card is mailed out, the APR and terms have to be available to everyone. Under this act, you are protected from uninformed credit use, and inaccurate billing and practices. In 1991, the FDIC Improvement Act, or Regulation DD, was passed. Known as the Truth in Savings act, it requires that depositories are open and clear with their fees, interest rates and other charges.
Credit Repair Organizations Act
The federal government passed the CROA in 1996. Credit repair agencies must have written contracts that describe their scope and service prices to their clients. They are not able to collect any money until they have performed the offered services. The CROA bans companies and consumers from falsely reporting negative credit information, while consumers have the right to cancel a contract within 3 days of signing.
Fair Credit Billing and Reporting Acts
Under Fair Credit Billing, you are protected against inaccurate billing charges. Not only did it limit your responsibility for charges up to $50, but you don’t pay for products you never received, goods you didn’t accept or double charges. The Fair Credit Reporting act provides several rights, including the right to access your credit file, the right to dispute inaccuracies and the right to a free report annually.
Dodd-Frank Wall Street Reform and Consumer Protection Act
In a lengthy set of regulations passed in 2010, these were passed in hopes of preventing a repeat of 2008’s financial crisis. It created many regulatory processes that enforce honesty, accountability and protection for taxpayers and consumers alike. Under its laws, shareholders can modify corporate proxy statements and the national thrift charter was eliminated. In 2011, Durbin Amendment was added, which limits the transaction fees that large debt issuers can charge merchants.
Credit Card Act Passed on May 22, 2009
Otherwise known as the Credit Card Accountability, Responsibility and Disclosure Act, this law was passed in 2009 and enacted in 2010. It restricts underage card issuance, while banning double cycle billing.
If you are a resident in the United States, you may or may not know about the Credit Card Act, passed on May 22, 2009, and signed into law by President Barack Obama. This piece of legislation was passed to change the governing laws regarding credit cards, how they are processed and to protect the consumer.
The specific verbiage of this new credit card law is the Credit Card Accountability Responsibility and Disclosure Act of 2009. Built to restructure the Federal Trade Commission Act and lend more transparency to the lending practices of US credit card companies.
Even if you aren’t considering a new credit card, it’s a good idea to know how the new law affects you and your credit cards. This primer is here to provide you with the real world application of how this law affects you in real life, rather than a legal interpretation of the law.
Protect Consumers from Unfair Credit Practices
The ways in which the Credit Card Accountability Responsibility and Disclosure Act protects consumers are numerous. Here are some of the critical points of this legislature, some of which may shock you as a credit card consumer.
Quite possibly the biggest part of the Credit Card Accountability Responsibility and Disclosure Act is that credit card issuing banks are now required to notify you when there’s a significant change in your interest rate, something they weren’t required to do previously.
Issuing banks or institutions must now provide at least 45 days before the rate increase is to take effect.
Retroactive Percentage Rate Increases
Credit Card issuers cannot increase your interest rate on your existing balance, unless the issuing bank disclosed this interest rate increase to you. How does this happen? Your issuing institution could offer you a credit card at an introductory price, after which it interest rate will increase after set amount of time.
If you own a variable rate credit card, there are unfortunately windows in which the issuing bank can retroactively raise your interest rate for the balance you owe. If you are more than sixty days late on a payment, this retroactive interest rate hike can also affect you.
Over Limit Charges
The new law eliminates the dreaded over-the-limit charges and fees related to overextending your line of credit. However the credit card companies are free to decline your transaction should you happen to do so.
Payment Acceptance Fees
Credit card issuers are no longer able to limit the ways in which you can pay your credit card bill. For instance, paying by mail or wire transfer can no longer be invoiced as a processing fee in your credit card bill.
Issuing banks or institutions are no longer able to charge you monthly should you fail to meet a required minimum, or simply not use your card at all.