President Obama signed the “Credit Card Accountability Responsibility and Disclosure” Act in May of 2009. The law was designed to further restrict credit card practices that the government and many consumer groups considered harmful. A few requirements of the law that I found to be interesting:
1. Credit card companies will not be able to charge a penalty fee that exceeds the amount associated with the violation. If the payment was $10.00, the penalty for paying it late can’t be more than $10.00.
2. Penalty fees must be “reasonable and proportional to the omission or violation”.
3. Late fees and fees for other violations against the terms and conditions of using the credit card can’t be more than $25.00 unless the violation is a repeat, or it costs the company more than $25.00 to deal with it.
4. Credit card companies are prohibited from charging inactivity fees on gift cards and gift cards can’t expire for 5 years.
5. Credit card companies must show the consequences of negative actions, including the release of periodic statements concerning the time it would take to pay off the balance and the total cost.
Some other changes:
1. All contracts and terms must now be in “clear in language”
2. The terms of the contract aren’t allowed to change for the first year.
3. All promotions must be plainly disclosed.
4. Consumers must no approve transactions that would place balances over limit instead of incurring an over-limit penalty.
5. Fees on low limit and bad credit cards would be restricted.
For those with serious credit card debt, the issue is whether or not this act has or will help them avoid bankruptcy.