Experts are noting that there is less than six months to go until the full implementation of President Obama's credit card Accountability, Responsibility, and Disclosure (CARD) Act of 2009. With less time on their hands, banks and credit card companies are scrambling to reorganize their policies and practices.
Some of the law's mandates are already being implemented to give credit issuers ample time to prepare themselves. Despite this, some legislators and consumer groups are crying foul over some card companies' ploys to milk more income from cardholders before the CARD act goes into full swing. More banks and card issuers are raising fees and charges in anticipation of the new law's restriction on interest rates.
Many consumer advocacy groups see the CARD act as long overdue. Many advocates also consider the new legislation as the credit cardholders' bill of rights. Banks and financial institutions, on the other hand, have raised opposition, saying that the new restrictions can severely affect the credit industry.
The CARD act will severely curtail the freedom of financial institutions to implement interest rate hikes without informing cardholders beforehand. Under the soon-to-be implemented law, card companies and banks have to inform consumers in advance about interest rate hikes.
The law also mandates that any excess over the minimum regular payments will be carried over to balances with the highest interest and to subsequent balances with lower amounts. Analysts say that this can give consumers a better chance to settle their debts and loans.
The latest implementation will force banks to give cardholders a 45-day notice before any increase in the annual percentage rate or APR. In the months leading up to its implementation, credit card issuers hiked up their cardholders' APR to ensure their profit. Transfer fees also saw substantial increases prior to this month.
When the law takes full effect in February of next year, banks will also be required to mail card statements at least 21 days before a particular payment is due. Retroactive rate increases will also be prohibited by the CARD act unless a cardholder is 60 days late on a payment.
The same law will also make it harder for students and consumers under the age of 21 to get a hold of credit cards. One of the legislation's mandates require underage applicants to present a verifiable proof of income or have a co-signer.
President Barack Obama signed the legislation into law last May 22 and its major implementation will be in February and August of next year.