The second phase of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act goes into effect today, and Attorney General Martha Coakley is reminding consumers the new law provides cardholders with enhanced protections.
"In recent years, consumers have been plagued by problems with credit card companies, from outrageously high interest rates, to sudden, unexpected changes in credit limits," said Coakley. "This new law will finally provide many of the much-needed safeguards. It is important that credit card users familiarize themselves with their rights under the CARD Act, and continue to carefully monitor their monthly statements to ensure that credit card companies are playing by the rules."
All credit card holders should be aware that the following changes under the CARD Act go into effect today:
• Right to 45-day notice: Credit card companies will be required to give a 45-day notice before making any major changes to a consumer’s account. Currently, most companies give a 15-day notice.
• No interest rate increases for the first year: Credit card companies cannot increase the interest rate within the first year after the account is opened, except in limited situations, and promotional rates must apply for at least six months.
• Restrictions on over-the-limit transactions: If a consumer’s account allows for over-the-limit fees, creditors cannot charge such a fee unless the consumer has elected to permit the creditor, after notice, to complete the transaction that will put the consumer over the credit limit.
• Protections for underage consumers: Consumers under the age of 21will no longer be able to get credit cards unless they have either (a) a joint account holder who is age 21 older; or (b) they can show proof of income.
• Payments directed to highest interest balance first: If a card has more than one interest rate, any payment made in excess of the required minimum payment must be applied first to the balance with the highest rate of interest.
• No double-cycle billing: Companies will only be permitted to charge interest on balances in the current billing cycle. The new law bans charging interest on the balances in two billing cycles, except under limited circumstances.
