An End to Many of the Credit Card Industry's Most Abusive Practices

New York - This afternoon, Congresswoman Carolyn Maloney (D-NY) and Senator Robert Menendez (D-NJ) joined with representatives of Consumers Union, NYPIRG, and New Jersey Citizen Action and others to hail new credit card reforms taking effect today. The reforms are part of the Credit Card Accountability, Responsibility, and Disclosure Act, which Maloney authored in the House and Menendez helped pass in the Senate.

These tough new consumer protections include bans on interest rate hikes on existing credit card balances and other tricks and traps that have lured consumers into never-ending cycles of debt. According to the Pew Safe Credit Cards Project, retroactive interest rate hikes and unfair penalty fees have been costing Americans upwards of $10 billion per year.

"This is a great day for anyone with a credit card in their wallet," Maloney said. "Most of the Credit CARD Act kicks in today -halting many of the worst abuses by the credit card industry. No longer will card companies be able to increase interest rates on existing balances, and that alone is a huge victory that will save Americans billions each year. The CARD Act's reforms will level the playing field for consumers and usher in a new era of fairness and transparency in the market."

"These reforms we've fought for years to enact are a big victory for every family that tries to stick to its budget and pay their bills on time while the six largest credit card companies are raking in $7.4 billion from penalty fees," said Senator Menendez. "Especially in these difficult economic times, it's time to level the playing field for families who take their budgets very seriously. For too long the balance had been tipped to credit card companies who turned their billing practices into a casino game, like a crapshoot for consumers every time they used their cards."

"For far too long, credit card companies have gouged consumers with deceptive and unfair interest rate charges and fees." said Charles Bell, Programs Director for Consumers Union, the nonprofit publisher of Consumer Reports. "These new rules will put an end to some of the most abusive credit card lending practices that have trapped millions of Americans in debt, and made it harder for them to make ends meet."

Summary of the Credit CARD Act:


P.L. 111-24
The CARD Act contains three separate implementation dates, 90 days, 9 months and 15 months after the bill was signed into law. Below is a summary of the CARD Act's reforms and when those provisions kick in:

Took Effect on August 20, 2009 • Requires card companies to provide 45 days' written notice to consumers of any increases in the interest rate or other significant changes to the terms of a credit card account;
• Requires giving consumers notice of their right to cancel the card before the rate hike goes into effect;
• Requires statements to be sent to consumers at least 21 days before the due date of any payments.
Became Effective Today, February 22, 2010

• Prohibits interest rate increases on existing balances unless cardholder is more than 60 days late in making payments;
• Prohibits "universal default" -the practice of raising a customer's interest rates if they are late paying a utility or other unrelated bill-on existing balances;
• Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions, and also limits over-limit fees on electing cardholders;
• Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
• Prohibits issuers from setting early morning deadlines for credit card payments;
• Prohibits interest charges on debt paid on time (double-cycle billing ban);
• Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;
• Protects recipients of gift cards by requiring all gift cards to have at least a five-year life span, and eliminates the practice of declining values and hidden fees for those cards not used within a reasonable period of time.

Will Become Effective August 22, 2010

• Requires penalty fees to be reasonable and proportional to the omission or violation.
• Requires that creditors periodically review all interest rate increases since January 2009 and reduce rates when a review indicates that a reduction is warranted.
• Amends the Electronic Fund Transfer Act to limit dormancy, inactivity, and service fees associated with gift cards.

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