CARD Act shifts power back to consumers, insists Obama
The US Credit Card Accountability
and Disclosure (CARD) Act, one of the most significant pieces of
card-related reform in recent years, came into effect on 22
February. The legislation has been hailed by US President Barack
Obama as helping to shift the balance of power back to
consumers.
The CARD Act was signed into law by Obama in
May 2009, and its main components include protecting credit
cardholders from certain fee and rate increases.
The new rules restrict credit card issuers
from raising rates on late payments from cardholders. It also
prevents them from charging over-limit fees unless cardholders have
previously given permission to authorise transactions that would
take them over their limit.
Other provisions mean cardholders can cancel
their card and pay off the existing balance at the original rate.
Promotional rates must also last at least six months and penalty
rates on existing balances can only be applied if a payment is 60
days late.
From 22 August, any penalty fees or rates must
be “reasonable and proportional” as defined by the Federal Reserve
and card issuers must periodically review a customer’s account and
potentially reduce their rates.