Senator Stabenow Hails Senate Passage of Legislation that Protects Consumers from Unfair Credit Card Company Practices

May 19, 2009 -- WASHINGTON — U.S. Senator Debbie Stabenow (D-MI) today praised bipartisan Senate passage of legislation that helps protect consumers against the often misleading and deceptive practices employed by credit card companies. The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 prevents credit card companies from unfairly increasing interest rates and targeting younger consumers, while strengthening oversight mechanisms and disclosure requirements.

“Families coping with these tough economic conditions while still paying their credit card bills on time shouldn’t be penalized with unfair penalties, fees, and interest rate hikes,” said Stabenow. “We have to work to remove the barriers to recovery that prevent families from getting back on their feet. This bill is just one step toward restoring fairness to our nation’s economic system, and preserving the American Dream.”

Article continues below...

The CARD Act is the Senate version of the House’s H.R. 627, known as the Credit Cardholders' Bill of Rights Act of 2009.

Major Provisions of the CARD Act include:

• CARD Act Prohibits Unfair Interest Rates Increases, Changes in Terms. The CARD Act prohibits arbitrary interest rate increases on existing balances, while requiring card companies that do increase interest rates to review and if warranted, modify the change. It prohibits card issuers from increasing rates on a cardholder in the first year after a credit card account is opened and requires promotional rates to last for a minimum of 6 months. When rates are increased, the consumer must be given 45 days notice. The legislation also stops companies from applying interest charges to debt paid on time, and prohibits card companies from charging late fees if the card issuer delayed crediting the payment. Furthermore, the bill prohibits card companies from charging a fee when the card is used to pay bills online, by mail, or on the phone, and requires any penalty fees to be proportional to the omission or violation.

• CARD Requires Payments Be Applied Fairly. The CARD Act requires that credit card companies apply payments to the card balance with the highest interest rate first. The bill also prohibits card companies from setting early deadlines for card payments and requires card statements be mailed 21 days prior to the due date.

• CARD Requires More Disclosure to Card Holders. The CARD Act strengthens disclosure requirements; mandating that companies list in the billing statement when the payment is due and the penalties if payment is late, and requiring card companies to disclose to consumers when the card terms have changed, and how long it will take a cardholder to pay off the card balance if only the minimum monthly payment is made.

• CARD Increases, Strengthens Oversight of Credit Card Industry. This Act requires each credit card issuer to post credit card agreements on the Internet and submit those agreements to the Federal Reserve Board. It also requires the Federal Reserve Board to review the consumer credit card market, including the terms of credit card agreements, the business practices of credit card issuers and the cost and availability of consumer credit. The bill also increases penalties for card companies that violate the Truth in Lending Act as it applies to credit card consumers.

• CARD Protects Young Consumers. The CARD Act mandates that card companies, that market extensively to students on college campuses, complete an agreement with consumers under 21 years of age. The agreement would include proof of means to, as well as parental consent and agreement to assume any debt that the cardholder could not. It would also limit pre-screened offers of credit to young consumers, as well as prohibiting increases in the credit limit for accounts cosigned by a parent.

Source: Senator Debbie Stabenow