May 20, 2009


Changes to current credit card practices are imminent. On Tuesday, the Senate approved CARD (the Credit Card Accountability, Responsibility, and Disclosure bill) by a 90-5 vote; today (Wednesday), the House voted 361-64 in favor of the legislation which would alter many of the credit card practices that have commonly come under fire. President Obama has said that he'd like to sign the bill by Memorial Day to "protect consumers and to bring some commonsense rationality to our financial system."

While most consumer advocates are in favor of the legislation, some have questioned the delay in implementation (9 months for many of the changes). Others have begun theorizing about potential unintended consequences to "responsible cardholders" (those who pay their balances in full each month). To compensate for lost revenue, some have predicted a resurrection of annual fees and an end to many card reward programs.

Summary of the CARD bill.
* Some of the changes are already on track to take effect in July 2010 under the Federal Reserve regulations that were established last year. The CARD legislation would uphold the outlined Fed changes and provide additional restrictions on card policies.

- 45 day notice on rate hikes and certain contract changes (15 prior).
- Eliminates fees charged for processing payments.
- Eliminates over-the-limit fees.
- Eliminates universal default.
- End to double-cycle billing.
- Mandatory 5 year life for gift cards.
- Rates cannot be raised for the first year after an account is opened.
- Reasonable payment allocation (Apply payments to highest rates).
- Restrictions on interest rate increases of existing debt.
- Restrictions on late fees.
- Statements must go out 21 calendar days in advance of the due date.
- Tighten issuance of credit cards to those under age 21:
--> Must have a proven capacity to repay OR
--> Complete a financial literacy course OR
--> Have a cosigner.

** Unfortunately, an amendment initiated by Senator Sanders of Vermont which would have also capped credit card interest rates at 15% was defeated in the Senate (60-33).