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Many Credit CARD Act of 2009 Provisions Take Effect Tuesday, February 22, 2010

Many of the provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the Credit CARD Act of 2009), signed into law on May 22, 2009, actually take effect this coming Tuesday, February 22, 2010. Among them:

  • Credit card companies are prohibited from increasing annual percentage rates (APRs) that apply to existing balances unless specific conditions apply. An APR may be increased only if 1) the index on which the rate is based changes, 2) it is a promotional rate that has expired, 3) a cardholder fails to comply with a hardship workout plan, or 4) the account falls 60 days past due.
  • If a rate increase is triggered by a cardholder falling 60 days past due on the account, the credit card company must inform the cardholder that the rate increase will be terminated (and the rate restored to what it was before the increase) once the cardholder has made timely minimum payments for six months.
  • If different APRs apply to separate portions of an outstanding balance, the amount of any payment beyond the minimum payment due must be applied to the portion of the balance with the highest APR.
  • Credit card companies must disclose (as part of the monthly statement) how long it would take the cardholder to pay off an existing balance in full if the cardholder makes only the minimum monthly payment due. This disclosure must also include the total that would be paid, including interest, and what the monthly payment would need to be to pay off the existing balance in 36 months.
  • A cardholder may not be charged an over-the-limit fee unless the cardholder authorizes the credit card company to complete the transaction that causes the balance to go over the credit limit.
  • A consumer under age 21 is prohibited from getting credit unless he or she can demonstrate the independent means to repay the debt or has a cosigner over 21 capable of repaying the debt.

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