Credit Card Accountability, Responsibility And Disclosure Act Of 2009

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 is a federal law designed to protect credit card users from abusive lending practices by card issuers. Its primary goals are the reduction of unexpected fees and improvements in the disclosure of costs and penalties.

The U.S. Congress passed the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 in May 2009, and President Barack Obama signed the bill. It is commonly known as the CARD Act. The act was designed to protect consumers from unfair practices on the part of credit card issuers. It aims to eliminate or lower certain credit card charges, minimize credit exposure for younger users of cards, and provide greater disclosure of fees to all users.

Some highlights of the CARD Act include:

• The act limits charges on universal default, which refers to the practice of applying higher interest rates to all future balances in the wake of a late payment. The act limits this practice in a cardholder’s initial period and mandates greater advance warning of interest rate hikes.
• The law requires that issuers inform cardholders how long it will take to pay off an existing balance at the minimum monthly rate as well as improve clarity of fee and penalty disclosure.
• The CARD Act prohibits many forms of marketing targeted at young consumers. These include merchandise giveaways on college campuses.
• The act limits fees and expirations dates on gift cards and non-reloadable prepaid cards.

Since its passage in 2009, consumer advocates have argued that the law does not go far enough in prohibiting abusive or unfair practices. Some interest rate increases, such as those resulting directly from Federal Reserve rate hikes or from the end of an introductory period, remain allowable without advance notice from card issuers. Deferred interest charges, or charges compiled retroactively at the end of an introductory interest-free period, are still allowed under the law. Perks used to market cards, such as identity theft protection, awards programs or penalty-free grace periods, remain generally unregulated as well. The law also fails to regulate cards or cards issued in the name of a business.

The CARD Act was passed as a series of guidelines written by Congress. The Consumer Finance Protection Bureau, or CFPB, is responsible for developing, implementing, and enforcing the rules necessary for compliance by card issuers. In the first four ears of the act’s existence, the CFPB found that the law had led to an overall decrease in the cost of consumer credit of 2 percentage points.