The Credit CARD Act: Phase 1 Starts August 20th

The first consumer protection provisions of the Credit CARD Act go into effect August 20, 2009. Here is what is happening: 

• Creditors must provide written notice to consumers 45 days before the creditor increases an annual percentage rate on a credit card account or makes a significant change to the terms of a credit card account. This is up from the current 15-day advance written notice that is required. However, this notice is not required if you have an introductory rate that expired, your card carries a variable interest rate, or you were paying a reduced rate under a hardship or “workout” plan and you failed to make your payments according to that plan.

• Creditors must inform consumers in the same notice of their right to cancel the credit card account before the increase or change goes into effect. If a consumer does so, the creditor is generally prohibited from applying the increase or change to the account. In other words, if you don’t want the card under the new terms, you can cancel it and pay it off under the old terms. However, the cardissuer can increase your minimum payment (as much as doubling it.)

• Creditors generally must mail or deliver periodic statements for credit cards and other open-end consumer credit accounts at least 21 days before payment is due. (Currently creditors must send statements at least fourteen days before the due date.) Note: The rules that prohibit due date traps like due dates that change without warning, and due dates on weekends or holidays when payments aren’t accepted don’t go into effect until February 2010.

While these changes seem straightforward, the Federal Reserve has published 107 pages detailing proposed rules to implement these changes. The proposed “final interim rules” are published in the Federal Register, and there is still an opportunity for issuers and consumers to comment on them.

Digging through the proposed rules, I found some nuances that are important. I will detail them in subsequent posts this week, so stay tuned.

Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis.