The Credit Card Act of 2009

What is the Credit Card Act of 2009?

The Credit CARD (Credit Accountability, Responsibility and Disclosure) Act of 2009, also known as the Credit Cardholder’s Bill of Rights, made many important changes to the way credit cards are regulated.

With regard to your credit report and scores, the new law makes your score more important than ever. The law limits the fees creditors may charge, restricts the ways those fees can be imposed and regulates the adjustment of the interest rates on your credit accounts. Because this increases the risk to the creditors and limits their ability to compensate for those risks with higher fees, they will only grant credit to people with the best credit histories and scores.

How does this law affect younger people?

 Essentially, anyone under 21 will have a very difficult time getting a credit card under the new law. Most consumers aged 18-21 will need a parent to co-sign on any credit card they obtain. This means that the parent shares responsibility for their adult offspring’s borrowing, and will have to repay the debts incurred if the borrower is unable to repay.

It is important that you set up a credit card account for your children when they reach age 18 and monitor their activity closely. 

This will give you the opportunity to protect yourself if the borrowing gets out of hand or there are repayment problems. And more importantly, this is how your adult children will establish a credit history and score that will allow them to borrow on their own when they reach age 21. 

Be aware that while the Credit CARD Act protects consumers from unreasonable rate hikes and fees, there is no cap on the interest rate creditors may charge. That means higher interest rates across the board, and many economists expect annual fees to be the norm under the new law.

Benefits of the Credit Card Act of 2009

• A ban on universal default and 2-cycle billing

• Industry standard rules requiring creditors to accept payments as on-time if they are paid by 5 pm on the due date

• Bills must be sent at least 21 days before the due date

• Customers must be permitted to pay by phone or internet without incurring additional fees

• Creditors must provide 45 days notice before increasing interest rates

• Consumers must opt-in before they will be able to exceed their credit limit

• If something happens that causes the creditor to raise your interest rate (if you miss a payment, for example) the creditor must now, by law, re-evaluate your credit standing after six months have passed. If you’ve had no more missed payments or other problems in your record during the intervening six months, the creditor must return your interest rate to where it was before you incurred a penalty rate.