Credit Cards and the Law: Key Regulations and Protections

Credit cards and the law are closely intertwined, with various regulations and protections in place to safeguard consumers. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 requires credit card issuers to clearly disclose terms and conditions.

The CARD Act also limits fees and charges, such as late fees and interest rate increases. These limits help prevent credit card companies from taking advantage of consumers.

Consumers have the right to dispute charges and request a credit card issuer to investigate. This is known as a chargeback.

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The Credit Card Act of 2009 is still in effect, protecting consumers from predatory lending practices. It limits confusing language, late fees, and higher interest charges on credit cards.

Debt collectors are also regulated by the Fair Debt Collection Practices Act, established in 1977. This act requires debt collectors to identify themselves, state their purpose, and contact you between 8:00 a.m. and 9:00 p.m.

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The CARD Act of 2009 also placed limits on fees imposed on consumers. Late fees are capped at $8 per occurrence, and over-the-limit fees are eliminated unless you opt-in to allow them.

Here are some key fee limitations:

The CARD Act also eliminated various credit card fees, including pay-to-pay and inactivity fees.

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Debt collectors can only contact you between 8:00 a.m. and 9:00 p.m., so you can enjoy some peace and quiet during off-hours.

They must identify themselves as debt collectors and state their purpose for contacting you, so you can quickly determine if they're legit.

Debt collectors are prohibited from lying to you, deceiving you, or harassing you, which is a relief for those who've dealt with pushy collectors.

If you tell a debt collector that your employer doesn't approve of work calls, they're not allowed to contact you at work.

You can put a stop to debt collector calls by requesting it in writing, and they must comply.

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The Electronic Fund Transfer Act was passed in 1978 to protect consumers when they transfer funds electronically.

This act applies to various electronic payment methods, including paying bills via telephone, using an automated teller machine (ATM), or using a debit card at a retail store's point-of-sale (POS) terminal.

The Electronic Fund Transfer Act only covers transactions that can immediately withdraw money from your account.

It's essential to know that the act does not apply to transactions made with credit cards, so you're still protected when using credit for purchases.

For more insights, see: Fair and Accurate Credit Transactions Act

Liability limits are in place to protect you from financial loss if your credit card is lost or stolen. If you contact the bank or card issuer immediately, you won't lose any money from your account.

You have a maximum loss of $50 if you contact your bank within two business days of noticing your card is missing. This is a standard limit, but some banks may have a higher limit, so be sure to check with your bank.

If you wait more than two business days to contact the bank, your liability limit increases, but you still have some protection. If you contact the bank within 60 days of the first incorrect account statement, your liability is capped at $500.

If you fail to contact the card issuer within 60 days of the first incorrect account statement, you risk unlimited loss to your account. This means you could lose all the money in your account if you don't act quickly.

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The Credit Card Act of 2009 has made a significant impact on the fees associated with credit cards. The law placed limits on late fees, which were initially capped at $25 for the first time a payment due date was missed and $35 if payments repeatedly came in late. As of March 2024, the late fee has been decreased and capped at $8 per occurrence.

The CARD Act also effectively ended over-the-limit fees for consumers, unless they specifically chose to opt-in and allow those fees. This means that if you reach the limits on your credit card and make purchases that go over the limit, those transactions should now be declined, and you won't be hit with an over-limit fee.

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The law also capped fees for subprime credit cards, which cannot exceed 25% of the credit limit established when the account was first opened. This includes annual fees, monthly fees, activation fees, and account set-up fees.

Here are some key fee limitations:

The CARD Act has made a significant impact on how credit card issuers charge interest on balances. One key change is that they can no longer charge interest on paid-off balances from previous billing cycles.

This is thanks to the prohibition on double-cycle billing, which used to allow issuers to charge interest based on the average daily balance from the previous two billing cycles. Now, interest is only charged on balances from the current billing cycle.

If you've carried a balance and then paid your bill in full, you might notice you get charged some interest on the next bill. However, that's the residual interest that accrued between when you received your last bill and when you paid it.

This change means you won't have to pay interest on debt you've already paid off, which can save you money in the long run.

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The CARD Act of 2009 aimed to protect consumers from predatory lending practices, but it didn't quite achieve a maximum interest rate cap.

A notable example is First Premier, a subprime card issuer that offered a credit card with a 79.9% interest rate in 2010. This highlights the lack of a cap on the maximum interest rate a creditor can charge.

In 2010, First Premier's 79.9% interest rate was particularly egregious, but it's worth noting that the company later offered a card with a 36% interest rate, which is the maximum rate allowed in South Dakota, where First Premier is headquartered.

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Active duty military personnel have a special right to place an active duty alert in their credit reports, which makes it harder for thieves to impersonate them while they're deployed.

Creditors must take extra steps to verify their identity, and the alert typically lasts one year but can be canceled sooner or renewed for longer.

To place or remove an active duty alert, you must call only one of the three national reporting agencies: TransUnion, Experian, or Equifax.

Credit card companies must disclose certain information when issuing a new credit or charge card, including interest rates, grace periods, and annual fees.

If a credit card has an annual fee, you must be reminded about it before the annual renewal, and if the company offers credit insurance, it must inform you of any increase in rate or decrease in coverage.

The CARD Act protects consumers from unfair and abusive practices by credit card companies, and its credit card safeguards fall under three broad areas: consumer protections, enhanced consumer disclosures, and protections for young consumers.

Legislators designed the CARD Act to protect consumers, and it includes a wide range of consumer protections, mostly related to interest rates, fees, disclosures, and marketing toward young adults.

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Credit card issuers must generally wait 12 months before raising your interest rate, and they must notify you 45 days in advance of any interest rate hike.

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The CARD Act of 2009 limits late fees to $8 per occurrence, with the last adjustment announced in March 2024. This new fee won't go into effect until 60 days following the publication of the ruling.

Credit card issuers can still charge high upfront costs to subprime borrowers, but the CARD Act of 2009 capped these fees at 25% of the credit limit established when the account was first opened.

Here are some notable exemptions from the CARD Act:

Withdrawal limits are put in place by EFTA to protect consumers from financial loss in case of card theft. Most banks set the daily limit at $200 or $300.

This means you can't withdraw electronically more than this amount in cash within 24 hours. This helps prevent large-scale theft if your card falls into the wrong hands.

Credit card issuers can't raise your rate during the first 12 months you have a card. After that, they have to send you a notice at least 45 days before an increase and have a reason for the increase.

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If you're 60 or more days late on your minimum monthly payment, creditors can raise the interest rate on your card to a penalty APR. This penalty APR can even apply to your existing balance, but if you make six months of consecutive on-time payments, your issuer must reduce your rate again on your existing balances.

Your existing balance won't be subject to the higher rate, only new purchases made at least 14 days after the notice. If you decide to cancel, the issuer has to give you five years to repay the outstanding balance at the original interest rate.

Here are some key exceptions to the rate increase limitations:

The CARD Act of 2009 has implemented several fee limitations to protect consumers from unfair charges. The initial cap on late fees was $25 for the first time a payment due date was missed and $35 if payments repeatedly came in late.

Late fees have been adjusted over the years, and the current cap is $8 per occurrence, which was announced in March 2024 and will take effect in May 2024.

Over-the-limit fees are now prohibited for consumers who don't opt-in to allow those fees. If you opt-in, you can still be subject to over-the-limit fees, but those purchases should be declined instead of being approved.

Subprime credit card holders often face high upfront costs, including annual fees, monthly fees, activation fees, and account set-up fees. The CARD Act has capped these fees at 25% of the credit limit established when the account was first opened.

Here are some key fee limitations:

The CARD Act may have introduced sweeping reforms, but it's not a magic bullet that covers every aspect of credit card issuers. Some notable exemptions and limitations include:

Small business and corporate credit cards are exempt from the CARD Act's protections, although card issuers can voluntarily add similar protections to their cards if they want.

The CARD Act doesn't limit the maximum APR that credit cards can charge, leaving consumers vulnerable to high interest rates. In fact, some subprime credit card issuers have taken advantage of this loophole to offer cards with interest rates as high as 79.9%.

Deferred interest promotions can be misleading, as they often come with a catch: if you don't pay off the balance before the promotional period ends, you'll be charged retroactive interest going all the way back to when you made the purchase.

Many subprime credit card fees are also exempt from the CARD Act's protections, allowing issuers to charge large fees before accounts open and bump up fees in the second year.

Some credit cards have deferred interest offers, which give you a low or no interest rate during a limited promotional period, but if you don't pay off the balance before the period ends, you have to pay all the interest that would have accrued.

Here are some examples of credit card practices that the CARD Act doesn't cover:

When you're first issued a credit card, the issuer must disclose certain information to you, such as fees and liability regulations. This is a requirement of the Fair Credit and Charge Card Disclosure Act of 1988.

The issuer must also provide you with a periodic statement summarizing your account activity, as mandated by consumer protection laws. This statement must be mailed or put online no later than three weeks before the payment due date.

If you make an electronic transfer, such as at an ATM, the bank must offer a receipt, and if the ATM is owned or operated by someone other than your bank, you may be charged a fee. This charge must be disclosed at the time of transfer.

The bank is also required to provide you with information about how long it will take to pay off your balance if you only make minimum payments, and how much you'll need to pay each month to pay off your balance in three years.

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Here's a breakdown of the important disclosures you should receive from your credit card issuer:

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 has made it easier for consumers to understand their credit card agreements by requiring issuers to use clear and easy-to-read language. The act also mandates the use of Schumer boxes, which provide a clear and concise summary of important rate, fee, and term information.

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The Credit Card Accountability, Responsibility, and Disclosure Act of 2009, also known as the CARD Act, is a federal law designed to protect credit card users from abusive lending practices by card issuers.

It was passed by the U.S. Congress in May 2009 and signed into law by President Barack Obama shortly afterward, taking effect in 2010.

The CARD Act was designed to expand on the Truth in Lending Act (TILA) and protect consumers from unfair practices of credit card issuers.

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It aims to eliminate or lower certain credit card charges, minimize manipulation of younger customers, and provide greater disclosure of fees to all users.

Before the act's passage, credit card agreements were often filled with opaque language and buried important terms in legalese, making it hard for consumers to compare products.

The act has made the language, terms, and disclosure of penalties and fees much more transparent, both in initial card agreements and monthly statements.

The Consumer Financial Protection Bureau (CFPB) is responsible for developing, implementing, and enforcing the rules to which card issuers must comply.

In the first four years of the CARD Act's existence, the CFPB found that the law had led to an overall decrease in the cost of consumer credit by two percentage points.

Over-limit fees had been almost completely eliminated, and the average late fee dropped from $35 to $27.

The CARD Act is still in effect, limiting predatory lending practices on credit cards and protecting consumers from various credit card factors, such as confusing language, late fees, and higher interest charges.

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