3 Credit Card Act Protections Went Live Sunday

Three of the provisions of the CARD Act, the legislation passed this year to improve consumer protection in the credit card arena, went into effect yesterday. Here’s what you need to know to sound smart around the water cooler:

1. Your interest rate can gets evaluated for possible lowering. If your rates went up after Jan 1 ’09, the issuers are supposed to look at why they went up and if the underlying basis for their rate raise has changed, consider possibly lowering them. We’ll see.

2. Only one fee can get charged for events/transactions that are against the cardholder agreement.

3. Gift cards must be good for at least five years, replacement cards are free, and dormancy, inactivity and service fees are banned (unless the card hasn’t been used for 12 months and even then it can only be one fee a month).

Additional Provisions of CARD Act take Place Sunday [LowCards]

Comments

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  1. dg says:

    re: #3) Yeah, it can be “1 fee a month” after 12 months. What if the fee is a 100% inactivity/dormancy fee?

    Is there a limit?

    • valladolid says:

      http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/news.aspx?feed=AP&date=20100818&id=11908791

      GIFT CARDS

      — EXPIRATION DATES

      New Protection: Gift cards issued after Aug. 22 must have expiration dates that are at least five years from their date of purchase.

      Gap to Watch: The rule doesn’t apply to certain gift cards, such as those issued as part of a rewards or loyalty program. So if you redeem your credit card rewards points for a retailer gift card, it could potentially come with a much quicker expiration date. The same is true for rebate cards issued by retailers.

      — INACTIVITY AND SERVICE FEES

      New Protection: Such fees can only be charged if the card hasn’t been used for at least one year. After that, only one fee can be charged each month.

      Gaps to Watch: There’s no cap on inactivity or service fees. So even though you can only be assessed one monthly fee, it could quickly eat away at a card’s value if it’s not used.

      The rules also don’t apply to reloadable, prepaid cards. These cards are sold in drugstores or online and often charge many service fees.

  2. smo0 says:

    So it sounds like they are retroactively dealing with the companies that upped their interest rates to curtail this CARD act change….

    did I read that right?

    • kiltman says:

      Yeah, but no teeth to the rule.

      • smo0 says:

        Either way, at least they recognize what has been happening to consumers for the last year….. last 6 months especially… I really hope they stick it….

        Honestly, of all the changes – this was the one thing I was hoping they’d “fix.”

        • hansolo247 says:

          Easy Peasy…

          the rate went up because lending is riskier (well, the same, but the risk was underpriced before).

          Bottom line, it’s feel good legislation with no teeth. They have to “evaluate” but any methodology can be used…

    • Xtopher says:

      You mean Citi didn’t boost my APR to 29.99% just for the fun of it?

      • smo0 says:

        No… no… that’s just their way of showing that they like you….

        You know.. in kindergarten… when the boys punched the hell out of the girls they had crushes on?

        yeah… that.

  3. GuyGuidoEyesSteveDaveâ„¢ says:

    The stupid local news was running a stinger saying that everyone might have to spend their gift cards this weekend.

    But on a serious note: I found a giftcard I got as a rebate that I lost and recently found, but expired in 10/2009. Do I have any recourse?

  4. c!tizen says:

    blah blah blah, yipiddy yack, pffffft.

    1. The BANK decided if the reason IT decided to up YOUR interest rate is justified. FAIL
    2. “Issuers can only charge one fee for a single event or transaction that violates the cardholder agreement.” and “The fee may also be higher if the credit card company can prove that the costs it incurred due to the late payments justifies a higher fee.” One fee per “event”, what constitutes an “event”? and I don’t ever recall a banker having a hard time “justifying” a higher fee. FAIL
    3. How big of a fee? Is it a flat fee or a percentage of the card? If it’s percentage, is that the original balance on the card or the current balance?

    If there is one thing I’ve learned from dealing with bankers, it’s BE SPECIFIC and GET IT IN WRITING!

    • mac-phisto says:

      not really. the “justification” thing isn’t so much a loophole as it is a trigger word. in the world of banking compliance, justification translates into increased documentation for examiners & regulators. this can create an examination nightmare, so most banks will not push the envelope. you don’t want to be the bank that has to prove that your operational cost is significantly higher than most other institutions – that’s like painting “EXAMINE ME HARDER, PLEASE!” in 10-foot high red letters on the outside of your corporate office.

  5. david0mp says:

    “1. Your interest rate can gets evaluated…”

    What?

  6. Evil_Otto would rather pay taxes than make someone else rich says:

    So the banks are supposed to evaluate my rate and lower it, just out of the goodness of their hearts?

    Forgive me if I don’t hold my breath.

    (I’m looking at you, E-Trade. 20% for someone with perfect credit is disgusting.)

    • hansolo247 says:

      If you have a balance, it isn’t that disgusting.

      It is debt with no collateral…it is riskier than debt with collateral.

      If you are in a position where you have uncollateralized debt you can’t pay off immediately, you ARE a financial risk.

      • Evil_Otto would rather pay taxes than make someone else rich says:

        I don’t carry a balance, I just find the principle disgusting (and there may come a time when I need to float a balance for a couple months on an unexpected expense.)

  7. Duke_Newcombe-Making children and adults as fat as pigs says:

    California FTW: We’ve had the “gift cards NEVER expire” or toll law for two years now.

    Now if we can fix that pesky $40BN deficit…

    • Garbanzo says:

      That CA law applies to retailer-specific gift cards. The credit card-branded gift cards that can be used at multiple retails have still been open to anti-consumer abuse, even in California.

  8. PeteWa says:

    Just called Chase, they raised my interest to 22+% late last year due to a mess up on the website, I went to pay off the balance, and the wrong money source was selected ( I swore I saw the right account). So NSF for payment of 4K that was paid two days later = 8% increase.

    Chase states that they do not have any policy in place to review accounts for the APR adjustment, and that I should call back in a few weeks.

  9. Jevia says:

    Be nice if they could make the credit cards replace the credit limits recently taken away.

    • hansolo247 says:

      Why do you care?

      Unless you already have a balance and want a bigger balance???

      Exactly where in the Constitution is a high credit limit even mentioned???

      My limit is over 20X the max I could conceivably put on a credit card in a given month…I could care less if that limit is lowered.

      If the “playing the FICO” game is you argument (which I think it is), 0 debt divided by any limit (other than 0) is a 0% utilization.

  10. Kimaroo - 100% Pure Natural Kitteh says:

    Great, so my Credit Union credit card that arbitrarilly raised my rate in October 2008 won’t be changing at all. Thanks a lot.

    I guess those sneeky bastards were quick enough on the draw to avoid the regulation. I’m still bitter about it because it was one month after we were hit by hurricane Ike and already suffering from having a couple of weeks off work without pay, having to deal with hurricane dammage and putting our lives back together.

    This is why I can’t reccomend credit unions in a blanket statement as so many other consumerist commentors like to do.

  11. Mondoz says:

    “2. Only one fee can get charged for events/transactions that are against the cardholder agreement.”

    Does that count for ATM fees as well?
    I used an ATM at a credit union the other day. I ended up with 3 fees totaling 5 bucks.
    $1.00 charged by the ATM
    $2.00 charged by my bank because the ATM wasn’t theirs
    $2.00 charged by my bank for ‘international fund transfer’??

    • Max5695 says:

      Most credit unions are part of the Co-Op ATM network. If you are a member of any credit union, you can use other credit union ATMs for free. There are many credit unions that offer free checking, huge ATM networks, and great rates like Alliant Credit Union. They have the best rates.

      Also, some credit unions offer ATM fee rebates. Or you can always join USAA for $15 of free ATM rebates per month.

  12. brookes says:

    i just got a letter in the mail for my First National credit card saying my interest was lowered to 13.99%. it was at 20 something but i don’t keep a balance so it never bothered me.