Overview of New Credit Card Legislation

The following are some of the major changes coming to credit card consumers as a result of legislation passed this week in Congress. The law will go into effect nine months from the date of enactment. I’m struck with how we have to legislate fair treatment and honesty.

WHAT CONSUMERS NEED TO KNOW ABOUT THE NEW CREDIT CARD LAWS:
• Creditors cannot increase the annual percentage rate (APR) during the first 12 months of opening up an account.
• Creditors are required to provide consumers with a 45-day advance notice of changes in rates and significant contract changes. Rates that change due to a change in the index that the rate is based on are excluded from this 45-day notice requirement.
• Promotional rates need to be in effect for at least six months from the beginning date of that promotion.
• Creditors need to provide a 30-day advance notice of an account closure.
• With certain exceptions, credit card issuers are prohibited from charging a finance charge based on the double billing cycle method.
• Creditors are prohibited from charging a fee on an outstanding credit card balance at the end of the billing period if the fee is attributed to the interest accrued on an outstanding balance that was fully repaid during that preceding billing period.
• Consumers have the right to reject a new credit card after the creditor notifies a consumer reporting agency of its corresponding account.
• Creditors are required to remove information provided to a consumer reporting agency about newly established credit card accounts if the consumer has not used or activated the account and and if the consumer contacts the creditor within 45 days of its establishment to close it.
• If two or more different APRs apply to different portions of an outstanding balance, the amount of any payment above the required minimum payment needs to be applied to the balance with the highest APR first and then to lower APR balances.
• Creditors are required to provide a grace period for payments even if the cardholder takes advantage of a promotional rate balance or deferred interest rate balance.
• Creditors are required to send credit card statements at least 21 days before the due date of the outstanding balance.
• Creditors are prohibited from providing credit to consumers under age 18 (unless they are emancipated under state law, or the consumer’s parent or legal guardian is designated as the primary account holder).
• For college students who do not have a co-signer, the maximum amount of credit extended will be limited to the greater of 20 percent of the student’s annual gross income or $500 dollars. The aggregate amount of credit extended from all of their credit cards will be limited to 30 percent of the student’s annual gross income (for the recently completed calendar year).
• Creditors are prohibited from opening a credit card account for any college student who does not have any verifiable annual gross income or already maintains a credit card account with that creditor, or any of its affiliates.
• Creditors are prohibited from charging a fee to make telephone and web-based payments. However, a fee may be charged for expedited telephone payments made on the due date or the day before the due date.
• Creditors are required to post their written credit card agreements on the internet.



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