Credit CARD Act of 2009

Credit CARD Act of 2009
Credit Card Accountability Responsibility and Disclosure Act of 2009
Great Seal of the United States.
Full title An Act to amend the Truth in Lending Act to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes.
Enacted by the 111th United States Congress
Effective February 22, 2010
Public Law 111-24
Stat. 123 Stat. 1734 through 123 Stat. 1766
Act(s) amended Truth in Lending Act
Fair Credit Reporting Act
Electronic Fund Transfer Act
Omnibus Appropriations Act, 2009
Title(s) amended Titles 5, 11, 15, 20 and 31
Legislative history
Major amendments
Relevant Supreme Court cases

The Credit Card Accountability Responsibility and Disclosure Act of 2009 or Credit CARD Act of 2009 is a federal statute passed by the United States Congress and signed by President Barack Obama on May 22, 2009. It is comprehensive credit card reform legislation that aims " establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes."[1] The bill was passed with bipartisan support by both the House of Representatives and the Senate.


Introduction and votes

The Credit Cardholders' Bill of Rights was introduced in the 110th Congress as H.R. 5244 in the House of Representatives by Representative Carolyn Maloney, a Democrat from New York and the chair of the House Financial Services Committee's Subcommittee on Financial Institutions and Consumer Credit. The bill had passed 312 to 112 but was never given a vote in the Senate.

In the 111th United States Congress the bill was reintroduced as H.R. 627 and on April 30, 2009, the House passed it, with a strong bipartisan basis, with 357 yes votes to 70 no votes. The Senate followed suit and passed an amended version on May 19 with 90 yes votes and 5 no votes.[2] The House passed the amended bill the next day by a vote of 279 to 147 and it was signed into law by President Barack Obama on May 22, 2009.

The bill went into effect on February 22, 2010, nine months after it was enacted.


The Credit Cardholders' Bill of Rights includes several provisions aimed at limiting how credit card companies can charge consumers, but does not include price controls, rate caps, or fee setting. According to a summary of the bill:[3]

  • Cardholders deserve protections against arbitrary interest rate increases.
    • Requires card companies give cardholders 45 days notice of any interest rate increases.
    • Gives cardholders the right to cancel their card and pay off their existing balance at the existing interest rate and repayment schedule if an interest rate increase is imposed; gives cardholders three billing cycles after the rate increase to decline these new terms.
    • Prevents card companies from retroactively increasing interest rates on the existing balance of a cardholder in good standing for reasons unrelated to the cardholder's behavior with that card (the "universal default" rate increase).
    • Prohibits card companies from arbitrarily changing the terms of their contract with a cardholder, banning the practice of "any-time, any-reason repricing."
  • Cardholders who pay on time should not be penalized.
    • Prohibits card companies from charging interest on debt that is paid on time during a grace period. This prevents the "double-cycle billing" practice.
    • Prohibits card companies from assessing fees on the remaining interest-only balance of a cardholder who has paid his/her bill on time.
    • Customers who have been subject to a rate increase and then pay on time for six consecutive months must have their interests rates returned to the rate it was before the rate increase. Requires creditors to review payment history each six months and to determine if a rate decrease should apply.
  • Cardholders should be protected from due date gimmicks.
    • Gives cardholders time to pay their bills by requiring card companies to mail billing statements 21 calendar days before the due date (14 days was the previous minimum).
    • Requires that payments made before 5 p.m. on the due date be considered timely.
    • Requires the due date to fall on the same day each month. If the fixed due date normally falls on a Saturday, Sunday or legal banking holiday, then the due date shall be pushed to the next business day after the date. This measure prohibits due dates to fall on a weekend or holiday, unless the card company accepts payments on those days.
    • Directs card companies to provide on every statement, a phone and internet address that a cardholder can access for payoff balances.
    • Prohibits card companies from charging late fees when a cardholder presents proof of mailing payment not less than 7 days before the due date.
  • Cardholders should be protected from misleading terms.
    • Prevents card companies from using terms such as "fixed rate" and "prime rate" in a misleading or deceptive manner by establishing single, set definitions of those terms.
    • Gives cardholders who get pre-approved for a card the right to reject that card up until the moment they activate it without having their credit adversely impacted.
    • Imposes a requirement that creditors have a minimum size font on their statements to improve readability of the terms for the credit card.
  • Cardholders deserve the right to set limits on their credit.
    • Requires card companies to offer consumers the option of having a fixed credit limit that cannot be exceeded.
    • Prevents card companies from charging over-the-limit fees on a cardholder with a fixed credit limit.
  • Card companies should fairly credit and allocate payments. (Title I, Sec 104 (4))
    • Requires card payments to be applied to the debt with the highest interest rate first, such as high-interest cash advances. It used to be that card companies could use debtors' payments to pay off the lowest interest rate balances first. The dollar amount of the minimum payment may still apply to pay off the lowest interest rate; however any dollar amount more than the minimum payment will be applied to the highest interest debt.
  • Card companies should not impose excessive fees on cardholders.
    • Limits the number of "over-the-limit" fees card companies are allowed to charge to 3 billing cycles. Some card companies currently charge limitless fees for going over credit limits.
    • Unless the consumer has expressly permitted the creditor to approve charges which make the balance over the limit, the creditor is not allowed to charge an over-the-limit fee if the balance goes over the limit.
    • Creditors who charge annual fees, account protection plans, or finance charges which then result in an exceeded balance are not allowed to charge an over-the-limit fee. If the balance goes over the limit due to reasons other than an extension of credit (such as a purchase), creditors are only authorized to charge over-the-limit fees if a late fee is charged.
  • Vulnerable consumers should be protected from fee-heavy subprime credit cards.
    • Requires that all fees for subprime cards, whose total fixed fees over a year exceed 25 percent of the credit limit, be paid up front before the card is issued. These cards are generally targeted to vulnerable consumers.
  • Congress should provide better oversight of the credit card industry.
    • Improves existing data collection on industry profits, as well as card fees and rates; requires this information to be presented to Congress every year.
  • Minimum payment explanation
    • Requires that creditors print on their statements if the debtor makes the minimum payment only (with no further increases in debt) how long it would take to retire the debt and how much the debtor would pay in interest combined.
    • Requires creditors to print on their statements the payment it would take the debtor to retire the debt in three years, how much the debtor would pay in interest combined and the difference than if the debtor was to pay only the minimum payment.
  • Limits credit cards to teens
    • A credit card cannot be issued to someone under age 21, unless they have a co-signer (who is 21 or over), or can provide proof of a means to repay.
  • College bank curtailment
    • Requires banks to provide a reason for participating on college campuses and at university-themed events.
    • Outlaws banks giving gifts or any promotional items (such as coupons for free pizza) to entice debtors to take on debt by signing with their credit cards.
  • Internet posting of credit card agreements (Title II, Sec 204 (a))
    • Requires card issuers to submit credit card agreements to the Federal Reserve Board at the end of each quarter.
    • Requires card issuers to make those same agreements easily accessible on their public Web site.
    • Requires card issuers to make it easy for cardholders to request a copy of the agreement for their account, either by clicking a link on a website or calling a readily-available 800 number. The agreement must be delivered within 30 days.
  • Establishes standards concerning gift cards
    • Prohibits retailers from setting expiration dates less than 5 years after the card is purchased.
    • Prohibits retailers from charging dormancy, inactivity, and service fees unless the card has not been used for at least 12 months. If fees are charged after this period, the details of such fees must be clearly established on the card, but retailers cannot assess more than one fee per month under any circumstances.
  • Establishes resources for approved non-profit credit counseling
    • Requires card issuers to make a toll-free phone number available on statements for consumers to reach non-profit credit counseling and debt managmeent organizations.

Amendment on Guns in National Parks

Gun rights advocates in the Senate, led by Tom Coburn (R-Okla) added an unrelated rider to the bill to prevent the Secretary of the Interior from enforcing any regulation that would prohibit an individual from possessing a firearm in any unit of the National Park System or the National Wildlife Refuge System.[4][5] The Senate passed the amendment 67-29.[6][7]

This amendment overturns a Reagan-era policy prohibiting firearms from being carried in national parks. The George W. Bush administration had attempted to implement a similar policy through the rulemaking process just before leaving office; however the change was struck down by a federal judge. This provision has been heavily criticized by environmentalists, anti-gun groups, and park supporters including the Coalition of National Park Service Retirees, but applauded by gun rights groups.[7][8]


Elizabeth Warren delivers the keynote speech entitled "The CARD Act: One Year Later" at an evaluation symposium held February 22, 2011

The act was not expected to affect existing credit card contracts.[9] However, the act that was passed does apply to contracts made in the past, setting an effective date of February 22, 2010, which gave banks time to prepare and notify their customers. While it is a common criticism that the CARD Act led banks to raise interest rates and limit credit availability in response to its passage, studies by[10] and the Center for Responsible Lending[11] revealed that such trends were merely the result of economic pressures typical of a recession and not the law. Actually, according to these studies, historical economic data shows that the interest rate increase and decline in available credit seen during the Great Recession should have been worse considering the widespread unemployment, credit card delinquency and credit card charge-offs.[10][11]

In a speech on the one-year anniversary of the CARD Act, Special Adviser Elizabeth Warren said that "much of the [credit card] industry has gone further than the law requires in curbing re-pricing and overlimit fees."[12] However, she said there was still much work to be done, that the Consumer Financial Protection Bureau's "next challenges will be about further clarifying price and risks and making it easier for consumers to make direct product comparisons."[13][14][15]

Sponsors and cosponsors

The bill was cosponsored by House Financial Services Committee chair Barney Frank and Representatives Maxine Waters, Luis Gutiérrez, Stephen Lynch, Keith Ellison, Steve Cohen, Chaka Fattah, Maurice Hinchey, Jim Langevin, Jerrold Nadler, Carol Shea-Porter, Hilda Solis, Peter Welch, Albert Wynn, Peter DeFazio, Charles Gonzalez, Gene Taylor, David Obey, Mazie Hirono, Debbie Wasserman Schultz, Nancy Boyda, John Dingell, Corrine Brown, Bennie Thompson, Alcee Hastings, Yvette Clark, Jesse Jackson, Danny Davis, Kirsten Gillibrand, Eddie Bernice Johnson, Diane Watson, Michael Arcuri, Eliot Engel, John Tierney, Chris Van Hollen, George Miller, Jim Moran, Anthony Weiner, Neil Abercrombie, and Jan Schakowsky.


  1. ^
  2. ^
  3. ^ Public Law Summary by Congressional Research Service, THOMAS, Library of Congress
  4. ^ Title.V. Section.512. of Public Law 111-24
  5. ^ Amendment SA 1067 proposed by Senator Coburn to Amendment SA 1058 of HR 627
  6. ^ Lillis, Mike (2009-05-12). "Senate Approves Coburn Gun Amendment…in Credit Card Bill". The Washington Independent. Retrieved 2009-06-13. 
  7. ^ a b The New York Times. "Bill Changing Credit Card Rules Is Sent to Obama With Gun Measure Included". By Carl Hulse. Published: May 20, 2009
  8. ^ McGuire, Kim (2010-02-20). St. Louis Post-Dispatch. Retrieved 2010-03-18. [dead link]
  9. ^ "Bingaman backs Credit Card Reform". KRWG. 2009-05-11. Retrieved 2009-10-19. 
  10. ^ a b "Study: The CARD Act's Impact on Rising Interest Rates". Retrieved 2011-06-23. 
  11. ^ a b "Credit Card Clarity: CARD Act Reform Works". Center for Responsible Lending. Retrieved 2011-06-01. 
  12. ^ Warren, Elizabeth (February 22, 2011). "The CARD Act: One Year Later". Remarks by Elizabeth Warren on The CARD Act. U.S. Department of the Treasury. Retrieved October 27, 2011. 
  13. ^ Saenz, Arlette (February 22, 2011). "Warren Praises Credit Card Industry for Transparency Efforts for Borrowers". ABC News. Retrieved October 27, 2011. 
  14. ^ Clarke, Dave; Aspan, Maria (February 22, 2011). "Credit cards still in US watchdog Warren's sights". Reuters. Retrieved October 27, 2011. 
  15. ^ Delaney, Arthur (February 18, 2011). "Elizabeth Warren: Shortcomings Of Credit Card Reform Show Need For CFPA". Huffington Post. Retrieved October 27, 2011. 

External links

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