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Oscar Dominguez: How new credit-card rules will affect everyone

Union Bank

Posted: June 19, 2009 3:55 p.m.
Updated: June 20, 2009 4:55 a.m.
Effective February 1, 2010, Santa Clarita Valley residents will be among the millions of credit-card users nationwide to experience extensive credit-card reforms featured in the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, recently signed into law by President Barack Obama.

The CARD Act addresses consumer protections and more oversight on credit-card industry practices. A provision in the new law, which states that credit-card issuers must provide cardholders 45 days notice before increasing interest rate, fee and finance charges, will take effect as early as August 2009.

According to the Obama Administration and the United States Senate Committee on Banking, Housing and Urban Affairs, the legislation includes the following elements:

  • Prohibits retroactive rate increases: The legislation forbids rate increases on existing balances or universal default — the practice of increasing interest rates if a customer is late on a payment with another company.

  • Over-limit fees: Credit card issuers will not be permitted to charge over-limit fees unless a cardholder permits the issuer to process over-limit transactions.

  • Restrictions on sub-prime fees: There will be increased restraints on sub-prime, low-limit credit cards.

  • Protections for young adults: The legislation requires that credit-card issuers and universities disclose agreements regarding marketing or distribution of credit cards to students. In addition, issuers must prove that young adults under the age of 21 have an independent means of repaying credit-card debt or have a parent, guardian, or other qualified individual 21 years or older co-sign the credit-card application.

  • Twenty-one days to pay: Credit-card issuers will be required to provide consumers “reasonable time” to pay their bills. Payments will be due at least 21 calendar days from the time the bill is mailed. 

  • Double-cycle billing: The new legislation prohibits double-cycle billing — when interest charges are calculated based on balances from previous cycles as opposed to the current billing cycle.

  • Payment allocation: Credit-card issuers will be required to apply payments exceeding the minimum payment to be applied to the highest interest-rate credit card balance first.

  • “Plain language” disclosures: Credit-card issuers will be required to provide credit-card terms “disclosed in language that consumers can see and understand so they can avoid unnecessary costs and manage their finances.”

  • Enhanced oversight: Credit card issuers will be required to post their credit-card agreements online in a “usable format.”

Oscar Dominguez is vice president and branch manager of the Stevenson Ranch branch of Union Bank. His column represents his own views and not necessarily those of The Signal.


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