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Getting to Know the Credit Card Rules: Credit CARD Act of 2009 NEW!
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Transcript of Getting to Know the Credit Card Rules: Credit CARD Act of 2009 NEW!
Getting to Know the
Credit Card Rules: Credit CARD Act of 2009
NEW!
February 22, 2010
Communicate with Consumers
CHANGE
COMING
Communicate What? When?
Interest rate increases Fee Changes Other significant changes
45 Days Notice Required
CAUTION!
Interest Rates
When Changes are Coming:
Decisions
Cancel Card
Accept changes
Risk increased
payments
Exceptions Variable interest rate
tied to index Introductory rate
expires Fail to make
payments as agreed
45- day Notice
Time to Pay Off BalanceNew balance $3,000Minimum payment due $90.00Payment due date 9/20/XX Late payment warning: If we do not receive your minimum payment by the
date listed above, you may have to pay a $35 late fee and your APRs may be increased up to the Penalty APR of 28.99%.
Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example:
If you make no additional You will pay off the And you will end up
charges using this card and balance shown on this paying aneach month you pay. . . statement in about. . . estimated total of
Only the minimum payment 11 years $4,745$103 3 years $3,712 (Savings +
$1,033)
Rate, Fee and Limit Changes
Interest rate increases for the first year
Exceptions
Variable interest rates Introductory rate ends 60+ days delinquent Non-compliance in workout agreement
Exceptions
Increased rates apply only to new charges
New Old
Increased rates apply
Do not apply
Over-the-limit (O-T-L) transactions
Opt-Out No o-t-l
transactions No fees if o-t-l
transaction slips through
Opt-in Allows o-t-l
transactions Only one fee per
billing cycle Can be revoked at
any time
Limits high card fees
Annual fees, application fees, etc. Capped at 25% of initial credit limit
Example:
Card limit $500
x .25
Max first year fees $125
Exception: Does not apply to penalty fees
Standard Payment Times
Must receive bill 21 days before due Consistent due date 5:00 pm cut-off Weekend/holiday provisions
Fair Application of Payments
Payments above minimum applied to highest interest rate first
Exception: Deferred interest plan Consumers:
Pay less interest Get out of debt faster
Ends Double-Cycle Billing
Two-cycle billing bases finance charges on both the current and previous balance
More costly to consumers Finance charges will now be computed only on
current cycle purchases
Deceptive Marketing of Credit Reports
Advertisements for free credit reports must disclose that free credit reports are available under Federal law at: www.AnnualCreditReport.com
Restricts Cards to Students
Applicants < 21 must have Adequate income OR Cosigner OR Completion of certified financial literacy course
Restricts credit limit increases Limits prescreened offers Restricts promotional gifts Disclosure of marketing contracts
Establishes Gift Card Protections
Five year expiration limit Limits inactivity fees Yields to stronger state laws Covers both retailer gift cards and prepaid
general use gift cards Limitations to coverage
Summary: Changes address
Communication requirements Rate and fee increases Balance pay-off data Over-the-limit restrictions Protections for underage consumers Billing and payment structure Deceptive marketing of credit reports, and Gift card protections
Any Questions?
For more information about managing money, credit, saving and investing ask about the LSU AgCenter’s Saving and Investing for Life (SAIL) Program.
References
Board of Governors of the Federal Reserve. (2010). What you Need to Know: New Credit Card Rules.
Consumer Union. (2009). Upcoming Credit Card Protections.
Johnson, C. & Gorham, E. (2009). Credit CARD Act of 2009: The changes and when they take place. Extension Extra. South Dakota State University Extension Service.
McFadden, L. (2009). 8 major benefits of new credit card law. Retrieved from www.Bankrate.com 7.1.09
Prater, C. (2009). What the new credit card reforms mean to you. Retrieved from www.CreditCards.com
The White House. (May 22, 2009). Fact Sheet: Reforms to Protect American Credit Card Holders. Retrieved 7/2/09 from www.whitehouse.gov/the_press-office/Fact-Sheet-Reforms-to-Protect-American-Credit-Card-Holders
Developed by: Jeanette Tucker, Ph.D., LSU AgCenter
Visit our Web site www.lsuagcenter.comLouisiana State University Agricultural Center, William B. Richardson, ChancellorLouisiana Agricultural Experiment Station, David Boethel, Vice Chancellor and DirectorLouisiana Cooperative Extension Service. Paul D. Coreil, Vice Chancellor and DirectorPub. 9/09Issued in furtherance of Cooperative Extension work, Acts of Congress of May 8 & June 30, 1914, in cooperation with the United States Department of Agriculture. The Louisiana Cooperative Extension Services provides equal opportunities in programs and employment.