The U.S. Senate passed a bill Tuesday aimed at providing increased consumer protection by imposing stricter regulation on the credit-card industry.
The bill is known as the “Credit Cardholders’ Bill of Rights Act of 2009″ and here’s a quick look at what it does:
Rate changes and account management.
- Allows a creditor to increase an APR on the existing credit card balance only if the increase is due solely to:
- a change in index.
- expiration of the promotional rate.
- payment not received during the 30-day grace period after the due date.
- consumer failure to comply with a workout plan.
- Requires a 45-day advance notice of:
- credit card account rate increases, except one resulting from a change in index
- significant contract changes.
- States that a promotional rate APR shall be effective for a six-month period beginning from the date the promotional rate takes effect.
- Requires a creditor to provide a 30-day advance notice of an account closure.
- Requires a creditor to remove information furnished to a consumer reporting agency concerning establishment of a newly opened credit card account if the consumer:
- has not used or activated the account
- contacts the creditor within 45 days of its establishment to close it.
Billing and statements
- Prohibits imposition of a double billing cycle as a result of the loss of any grace period.
- Prohibits the imposition of a fee on an outstanding credit card balance, at the end of a billing period, that is attributable only to interest accrued during the preceding billing period on an outstanding balance fully repaid during that preceding billing period.
- Requires each periodic statement of account to provide the toll-free telephone number, Internet address, and website at which the payoff balance may be requested.
- Declares that any payment beyond the required minimum payment shall be allocated first to the balance with the highest APR.
- Prohibits a creditor from denying a cardholder a specified payment grace period if the cardholder takes advantage of a promotional rate balance or deferred interest rate balance.
- Requires creditors to send a periodic credit card statement of account to the consumer at least 21 calendar days before the due date for the next payment on the outstanding balance.
- Prohibits a creditor from treating as a late payment the receipt of a periodic payment by mail as of the creditor’s next business day if the date established by the creditor as the payment due date is a day on which mail is either not delivered or is not accepted by the creditor for processing.
College and high school students.
- Prohibits extensions of credit to consumers under age 18, unless they are emancipated under state law, or the consumer’s parent or legal guardian is designated as the primary account holder.
- Limits the maximum amount of credit which may be extended to a college student for whom no one else assumes joint liability to the greater of:
- 20% of the student’s annual gross income
- $500. Limits the aggregate credit limits of all such credit cards to 30% of the student’s annual gross income in the most recently completed calendar year.
- Requires:
- parental approval to increase credit lines for accounts for which the parent is jointly liable
- a creditor to require adequate proof of income, income history, and credit history before any college student credit card account may be opened by or on behalf of a student.
- Prohibits a creditor from opening a credit card account for any college student who:
- has no verifiable annual gross income
- already maintains a credit card account with that creditor, or any affiliate.
Fees and Minimum payments
- Prohibits a creditor from imposing a fee based on the manner in which payment on the account is made.
- Revises and expands requirements for mandatory minimum payment disclosures which a creditor must furnish.
- Prescribes a minimum type-size and font requirement for credit card applications and disclosures.
- Prohibits the charge of an over-the-limit fee unless the consumer permits the creditor to complete the relevant transaction (opt-in).
- Allows imposition of an over-the-limit fee only once during a billing cycle.
- Prescribes a standard for the initial issuance of subprime or “fee harvester” cards (accounts requiring first-year fee payments in excess of 25% of the total amount of credit authorized).
Read the full details of the bill here.
This is just past the senate hurdle, and hence not yet a law so things may change. Still, I think it’s a big step in the right direction!
photo by Andres Rueda
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