What the Credit Card Act of 2009 means

The Credit Card Act of 2009 was introduced in Congress by people close to the Obama administration because the credit crunch convinced a number of legislators, and their constituents, that the credit card industry needed to be regulated.  There were a number of things that were done with the credit card act.

Firstly the bill aimed to protect credit card users against arbitrary increases in interest rates.  This was done by requiring a 45 day notice if there was any increase in the interest rate.  Cardholders who objected were allowed to opt out, although they could not borrow any more on the card they were able to pay off their card balance at the old rate.  Universal default, when credit card rates were raised for reasons that had nothing to do with a credit card holders’ behavior were also banned.

Another principle that was put in was that card holders who paid on time should not be penalized.  Interest was not allowed to be charged during a grace period.  Penalty rates were also regulated as someone who had their credit card on a penalty rate because of previous bad behavior was to revert back to their previous rate if they had a history of paying the card on time for six months.

There was also a protection for card holders from due date tricks.  One thing that was done was to increase the time before the card needed to be paid from fourteen days to twenty one days.  Payments made before 5 pm on the business day were to be considered timely.  Due dates also had to be set on the same day each month.

There was protection from misleading terms through the use of single set definitions for terms such as “fixed rate” and “prime rate”.  A minimum font size was also mandated for terms and conditions.
Other practices that were attacked were the use of payment hierarchies where lower interest balances were paid off before higher interest balances, the automatic increasing of credit card balances and the extension of credit to under 21 year olds who could not demonstrate an independent income.

Excessive fees were limited by the setting of a maximum of three over the limit fees per year.

Minimum payment explanations were also improved so that people would know how long it would take before the minimum payment would pay off the loan.