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The Credit Card Act: Protecting Consumers


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Landmark reforms to the credit card industry went into effect this week, thanks to the common sense reforms in the Credit CARD Act. The law, which was passed by Congress and was signed by President Obama last year, ends unfair industry practices, lessens excessive charges going to credit card companies and puts more money in the pockets of consumers.

With almost half of American families currently carrying a credit card balance and credit card debt in the U.S. reaching almost $1 trillion, this legislation will provide much needed relief and protection to those Americans who have suffered from confusing agreements and unnecessary credit card fees.

Credit card companies have been taking unfair advantage of consumers for too long. A 2005 report by the Government Accountability Office estimated that 70 percent of card issuers' revenue came from interest charges. The new law protects consumers from just that. It bans retroactive interest rate hikes on existing balances (except when payments are more than 60 days late), double-cycle billing and due-date gimmicks, and stops companies from charging over-the-limit fees unless the consumer opts in. According to the Pew Charitable Trust, which tracks credit card issues, consumers will save at least $10 billion a year from curbs on interest rate increases alone, that's more money in family pockets and less profits for credit card companies.

The Credit CARD Act also increases notice of any rate hikes going forward on new purchases to 45 days, requires card companies to fairly credit and allocate payments and prohibits charging fees just to pay a bill by phone. It also protects young consumers by requiring that before cards can be issued to anyone under 21, a parent must co-sign or an ability to pay must be demonstrated.

The Credit CARD Act is part of the long-term plan to rebuild our economy in a way that works for middle-class families and rewards responsibility and hard work. I am proud that we have taken this step to stand up for consumers' rights and I am pleased to empower consumers with the information to help them make sound financial decisions.

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