Credit Card Accountability, Responsibility, and Disclosure Act of 2009 Definition

What Is the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 ?

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 is a federal jurisprudence designed to protect credit circuit board users from abusive lending practices by card issuers. normally known as the CARD Act, this jurisprudence ‘s primary goals are the reduction of unexpected fees and improvements in the disclosure of costs and penalties .

Key Takeaways

  • The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 seeks to curtail deceptive and abusive practices by credit card issuers.
  • The CARD Act mandates consistency and clarity in terminology and terms across credit card issuers.
  • This legislation has saved consumers money and made it easier to compare credit cards.
  • The CARD Act is not without its critics, some of whom claim it hasn’t curtailed abuses by issuers enough, while others feel it has made credit cards more expensive and difficult to obtain.

Understanding the Credit Card Accountability, Responsibility, and Disclosure Act of 2009

The U.S. Congress passed the Credit Card Accountability, Responsibility, and Disclosure Act in May 2009, and President Barack Obama signed it into police curtly subsequently. It took effect in 2010 .

Expanding on the Truth in Lending Act ( TILA ), the CARD Act was designed to protect consumers from the unfair practices of credit card issuers. It aims to eliminate or lower sealed credit batting order charges, minimize manipulation of younger customers, and provide greater disclosure of fees to all users .

Before the act ‘s passage, the terminology in recognition wag agreements was much quite opaque and literally difficult to read ; significant terms were buried in ream of legalese, and the information provided was inconsistent among unlike issuers, making it hard for consumers to compare products. The act has made the language, terms, and disclosure of penalties and fees much more crystalline, both in the initial card agreements and in monthly statements .

The Consumer Financial Protection Bureau ( CFPB ) is responsible for developing, implement, and enforcing the rules to which card issuers must comply. In the first four years of the CARD Act ’ south being, the CFPB in a 2015 report found that the police had led to an overall decrease in the cost of consumer credit by two share points. Over-limit fees had been about completely eliminated, and the average deep fee dropped from $ 35 to $ 27 .

Provisions of the Credit Card Accountability, Responsibility, and Disclosure Act

A series of guidelines written by Congress, the CARD Act is divided into five sections .

Some highlights of the provisions include :

  • The act limits charges on universal default, which refers to the practice of applying higher interest rates to all future balances in the wake of a late payment. The act limits this practice in a cardholder’s initial period and mandates greater advance warning of interest-rate hikes.
  • The act requires that issuers inform cardholders how long it will take to pay off an existing balance if they just pay the card minimum each month.
  • The act prohibits many forms of marketing targeted at young consumers, such as merchandise giveaways on college campuses (“free stuff—all you have to do is sign this application…”).
  • The act limits fees and expiration dates on gift cards and non-reloadable prepaid cards.
  • The act does not permit a credit card company to allow an account to go over its limit and then charge the customer a fee for doing so. Customers now have to be given the choice whether to “opt in” to over-limit charges on their credit card account. If they decline to opt in, they will have their cards declined when a proposed charge or withdrawal would put the balance over the limit.
  • The act mandates that statements be mailed or put online no later than three weeks before the payment due date and that due dates be consistent (unless changed by the cardholder).

The CARD Act mandated the use of Schumer boxes ( named for Senator Charles Schumer ) —the easy-to-read tables that recognition menu issuers now use to distinctly disclose crucial rate, fee, and term and condition data.

Shortcomings of the CARD Act

Since its passage in 2009, consumer advocates have argued that the law does not go far enough in prohibiting abusive or unfair practices. Some matter to rate increases, such as those resulting directly from Federal Reserve rate hikes or from the end of an basic period, remain permissible without advance notification from wag issuers. Deferred interest charges, or charges compiled retroactively at the end of an introductory interest-free menstruation, are still allowed under the jurisprudence. Perks used to grocery store cards, such as identity-theft protection, rewards programs, or penalty-free seemliness periods, remain generally unregulated equally good. The law besides fails to regulate cards issued in the name of a business .

fiscal diligence groups besides criticize the police for driving up sake rates and annual fees ; they besides claim it ‘s storm wag issuers to lower menu credit limits and increase customer qualifications, making it difficult for people with odd or limited credit histories to obtain citation cards that will cover their needs .

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