Sunday, August 22, 2010

Card Act

The Credit Card Accountability Responsibility and Disclosure Act of 2009, known as the Card Act, was intended to reshape the contours of consumer finance. Among other things, it forces card issuers to give customers more notice about interest-rate increases and restricts certain controversial billing practices such as inactivity fees.

the Card Act stipulates that late-payment fees shouldn't be triggered on a Sunday or holiday, when there is no mail delivery. The Card Act also stipulates that issuers can't jack up rates on existing balances unless a cardholder is at least 60 days late. But there is a creative maneuver around that: the so-called rebate card Rebate offers aren't governed by the Card Act, and an issuer can revoke them suddenly and hit cardholders with high charges.

Shortening the billing cycle is another new tactic some banks may be using. The Card Act requires companies to provide a window of at least 21 days from when a statement is mailed and when payment is due.

Card Act rules forbid the waiving of annual fees based on "a customer's annual spending on the card." He adds, however, that "the rules will not prohibit cash-back rewards or similar incentives that encourage account usage."

Another potential trap: low-credit-limit cards, which are popular among college students.

The Card Act says a card's total annual fees can't exceed 25% of a borrower's credit line. But some issuers may be evading the fee restrictions by charging an upfront processing fee that doesn't fall under the 25% cap.