What Final Phase of Credit Card Act Means for Consumers

Yesterday, on August 22, 2010, the final phase of the 3-part Credit CARD Act of 2009 went into effect. February saw the bulk of changes mandated by Congress in the way banks manage credit cards, but the final phase of the CARD Act includes some significant changes that will impact consumers. Credit repair professionals say the new changes provide additional protection to consumers from unfair and arbitrary practices by credit card issuers.

Credit card fees.

•Those annoying inactivity fees that credit card issuers charged card holders who did not use their cards are no longer permitted. Also, consumers cannot be charged for failing to meet minimum charge amounts.

•Credit card issuers are prohibited from leveling late fees that are greater than the minimum monthly payment.

Credit card interest rates.

•When credit card issuers increase a card holder’s interest rate because of late payments, they must give the consumer an opportunity to earn back the previous rate. If a card holder pays his account on time for six consecutive months, his interest rate must be lowered to the previous rate.

•Starting February 2011, credit card issuers must review a consumer’s account every six months if their interest rate was increased for any reason after January 1, 2009. If the circumstances that caused the increased interest rate no longer apply, the card issuer must reduce the consumer’s interest rate. One flaw in the new law is that it does not specify the reduction amount.

Gift cards.

•The new law protects the long-term value of gift cards. Gift cards, prepaid cards and gift certificates cannot expire within 5 years of activation, unless — and here’s the loophole – the terms and expiration are clearly disclosed before purchase.

•If consumers load additional funds onto a gift card, the 5-year expiration period is automatically extended by 5 years.

Credit repair professionals should make certain that their clients understand the latest credit card changes made under the Credit CARD Act. Click here to access a Credit.com’s Consumer Guide explaining all of the CARD Act changes.