Have you ever accidentally overcharged your credit card by a few dollars and been forced to pay a hefty fee? Many people have encountered overdraft fees of upwards of $35 per charge. Now, under the new Federal Reserve Board regulations, you must authorize your credit card company to allow you to go over your limit or the company cannot charge you this fee. If you don’t authorize your credit card company to permit you to exceed your credit limit, your transaction will be rejected if you lack sufficient funds.
This is just one of several important consumer protections that were secured in The Credit CARD Act of 2009 (H.R. 627) which was passed by Congress and signed into law in May 2009. Many components of this new credit card holder’s bill of rights are already in effect.
Here is a brief run-down of what you can expect from your credit card provider, right now:
Expanded consumer protections on rates, fees and limits
• No retroactive interest rate hikes: If your credit card company increases your interest rate, the new rate applies only to new charges. As long as you pay on time, your original interest rate will apply for the previous balance.
• No interest rate increases for the first year: If you pay your bill on time, your credit card company cannot increase your interest rate for the first 12 months after you open an account (unless you’ve agreed to an introductory or variable rate).
• Customers must opt-in to over-the-limit fees: Additionally, credit card companies can only charge over-the-limit fees once per billing cycle.
• Protections for consumers under 21 years old: If you are under 21, you will need to show you are able to make payments, or provide a co-signer, in order to open a credit card account.
Fair disclosure requirements
• 45-day notification of rate changes: Your credit card company must now provide you with 45 days of advance notice before increasing your interest rate on purchases going forward.
• Clear disclosure of your balance repayment schedule: Credit card bills must now include information on how long it would take to pay off your balance if you make only minimum payments. They must also show how much you would need to pay each month in order to pay off your balance in three years.
Changes to billing and payments
• Standard payment dates and times: Credit card companies must now mail or deliver your bill at least 21 days before your payment is due. Billing cut off times cannot be earlier than 5 p.m., and you will have until the following business day if the due date is on a holiday or weekend.
• Payments over minimum now applied to highest interest rate balances: While some credit card companies used to apply payments to your lowest interest rate balance, issuers must now apply the payment to your highest interest-rate balance first.
By protecting consumers from retroactive rate increases, misleading late fee charges, over-limit fee traps, and other abusive tactics, the Credit CARD Act is a giant step forward in the struggle to end unfair practices by credit card companies. It’s just one example of Congress’ ongoing effort to level the economic playing field for all Americans through greater transparency and oversight of the financial sector.
Rep. James Moran (D) is Virginia’s 8th Congressional District Representative in the U.S. House of Representatives.