President Obama signed into law today the new Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009.
This is really good news for consumers, and perhaps not so good news for the credit card industry.
This new law eliminates a lot of the abusive practices credit card companies have been getting away with for years. Things like confusing contracts, miscellaneous and mysterious fees, shifting payment deadlines, changing terms, and interest rates rising out of the blue.
Thank goodness and about time!
During the press conference, President Obama made it clear that irresponsible credit behavior is not excused or condoned; and discussed how this legislation will help those who try to be responsible with credit, but may end up trapped by the increased used of their credit cards as the the result of a job loss, health insurance not covering expensive medical bills, a mortgage payment that jumped sky high, or a small business financed on credit cards that's suffering from the poor economy.
As it stands now, even as a responsible credit card user, you can be charged interest even if you pay your bill on time; your interest rate can be increased on outstanding balances even if you aren't late with a payment; and you can be forced to pay down your debt with the lowest interest rate first instead of the highest, which just makes it harder to get out of the hole.
President Obama also points out the fact that although credit card companies provide a valuable service, they should do so while upholding certain standards of fairness, transparency and accountability. Hmmm... ya think?
He states, "Just as we demand credit card users to act responsibly, we demand credit card companies to act responsibly, too."
Some of the changes taking place include:
- credit card statements disclosing to cardholders how long it will take to pay off a balance, and how much it will cost in interest if only minimum monthly payments are made
- no more retroactive interest rate increases that go into effect with no explanation or warning
- every credit card company will have to post their credit card agreements online
- credit card companies will have to mail credit card statements 21 days before payment is due, as opposed to only 14 days
- no more arbitrarily changing payment due dates
- at least a 45 days notice is to be provided of a change in terms and conditions
The President states that over the past decade credit card debt in the US is up 25%; nearly 50% of all Americans carry a balance on their credit cards, with an average balance of more than $7,000; and 1 in 5 people have a credit card balance that's charged over 20% interest.
With statistics like these, this legislation comes not a moment too soon.
You can catch the video (11:17) of President Obama's announcement of this sweeping credit card reform below: