Two years later and the Credit Card Accountability, Responsibility and Disclosure Act is still the topic of discussion, as most new rules and regulations site the law. Consumers have felt the affects in hiked ATM fees, new monthly debit card charges, charges for inactivity and stricter standards when applying for loans.
By demanding clarity and transparency from credit card issuers, the Credit CARD Act of 2009 is providing the industry with much needed consumer-friendly legislation. The law puts new regulation on how banks deal with interest rate hikes, introductory offers, and delinquent payments. But some things that you thought you knew about the act, have some loopholes that you don’t even know about.
1. First, interest rates can still rise. Many analysts believed that the ACT would lock interest rates at a certain rate. While the CARD Act prohibits banks from raising interest rates, it’s only in the first year after a credit card is issued. And there are some major exceptions. For variable-rate cards, banks can write in the contract that they have the ability to raise your interest rate whenever it’s tied to a publicly reported or prime rate. Interest rates can also increase if you are more than 60 days late.
2. Second, interest rates are still subject to change in this market, and when you have a lower credit score you are at the mercy of credit card companies, and they can legally charge whatever the market will allows them to. There was much debate over the cap on interchange fees and how it would force American banks to charge consumers more in order to make up for lost revenue. There is a cap on interchange fees, not interest rates.
3.Third, banks only have to give short notice of rate increase. Also, under the CARD Act, banks are required to give 45 days notice before they increase a consumer’s rate. But the 45 days really refers to 45 days after your payment due date, not 45 days after the date of rate increase. What that really means is that if a credit card company does increase your rate, you have to make your first new payment at the higher rate in 45 days of your last payment. The CARD Act technically allows credit card issuers to charge consumers the higher rate 14 days after they’ve mailed the notice. “It’s a very confusing aspect of the CARD Act,” said Linda Sherry, a credit card expert with Consumer Action.
4. Finally, college students can still get credit cards. Another promise of the CARD Act was that it would reduce marketing to college aged students. It was designed to protect young consumers from confusing language and misguided financial management. Students under 21 would have to show that they make “sufficient” income or get a co-signer for the card. Also, the act said that banks could not set up tables on college campuses or directly market to the youth. But, credit card companies are clever marketers and know how to get around the loopholes. Many credit card companies simply set up shop a couple blocks from campus and offer free giveaways to entice the college market.