In May last year, the US Congress approved and passed the 2009 CARD (Credit Card Accountability Responsibility and Disclosure) Act. This Act came into play in order to offer protection to customers against the certain lending practices and adhoc interest changes that the US Congress found objectionable. The law that has come into effect in recent times enforces certain reforms that will help the debtors handle their existing credit in a responsible manner.
Important Provisions that make a difference
As per the new federal law, no credit card companies in the United States can bring about any adhoc changes in the interest rates on the credit card for the first 12 months from when the consumer opens his account with the bank. However, there are certain exceptions to this.
a. Changes can be brought about if the card holder fails to repay any amount on his dues for up to 2 months from the date the payment was due.
b. Once the promotional period on the card lapses, the change in the APR can be brought about only if the promotional period lasted for a period of 6 months or more.
c. Changes are permitted if the increase in the APR is linked to a variable interest index rate.
The credit card companies cannot charge any excess fees to the consumers. This is permissible only if the customer has given specific instructions to the lender to permit transactions over and above the limits offered on the credit card.
The companies that issue credit cards to consumers must review their customer database once every six months if they intend to increase the rate based on the consumer risk and prevailing market conditions. However, if the market conditions are favorable and favor a decrease in the rates on the credit cards, the lenders must drop the interest rates.
If the bank proposes to increase the rate of interest for a particular customer, the bank should give that person an option to close the credit card account prior to the changes coming into play. It will not be considered as a breach of contract by the holder of the card if he chooses to close the card due to the increase in the interest rates. If the card holder chooses to close the card, the lender should not pressurize the card holder to repay the entire debt on the card, but offer various payment options from which they can choose.