An Attempt to Understand The Credit CARD Act of 2009

The Credit CARD Act of 2009 is a 45 page long amendment to the Truth in Lending Act that makes for a wonderful cat bed—at least, that’s what my cats seem to think as they both stretch out luxuriously on its pages. And that’s fine for them, after all, they don’t have to worry about interest rates, late payment penalties, underage consumers and financial literacy because those are all human problems.

Honestly though, I’m not sure my understanding of the verbose Credit CARD Act of 2009 is a whole lot better than my cats’ understanding of it and that is really a problem because, unlike them, I am a human. With that in mind, here is a little breakdown of the salient points, at least as I understand them. If you want to come up with your own interpretation, feel free to view the act itself here.

SEC. 171. LIMITS ON INTEREST RATE, FEE, AND FINANCE CHARGE INCREASES APPLICABLE TO OUTSTANDING BALANCES. A credit card company cannot raise your interest rate on an existing balance except for reason listed in the first three paragraphs of section 171 (b) which include:

• The consumer pays their bill late.
  
• The increased interest rate is only on new purchases.
• The increase is the result of a temporary hardship agreement.

SEC. 172. ADDITIONAL LIMITS ON INTEREST RATE INCREASES. Introductory rates cannot be raised for the first 6 months.

SEC. 102. LIMITS ON FEES AND INTEREST CHARGES. Instead of automatically approving those purchases that will put your balance over the limit, the credit card companies now need your permission to approve them. In addition, there are now limitations on the amount of over-the-limit fees you can be charged. You can be charged only 1 time per cycle and then once again for 2 more billing cycles UNLESS a new limit is issued and exceeded.

SEC. 149. REASONABLE PENALTY FEES ON OPEN END CONSUMER CREDIT PLANS. Late fees and other penalty fees must be, “reasonable and proportional to such omission or violation.” That means the credit card companies must take into consideration the damage done by the late payment, the behavior of the cardholder and how much it will take to deter such activity in the future.

SEC. 104. APPLICATION OF CARD PAYMENTS. Payments in excess of the minimum payment will be applied to the balance with the highest interest rate first.

SEC. 163. TIMING OF PAYMENTS. Statements must be mailed at least 21 days before the payments are due.

SEC. 150. CONSIDERATION OF ABILITY TO REPAY. Cards can’t be issued and limits can’t be increased unless the credit card company considers a consumer's ability to actually repay the debt that could be incurred.

SEC. 201. PAYOFF TIMING DISCLOSURES. New disclosures will be added to your bill that divulge how many months it will take to pay off and what you will ACTUALLY pay for your purchases and interest when only making minimum payments.

SEC. 301. EXTENSIONS OF CREDIT TO UNDERAGE CONSUMERS. If you are under age 21 then you need to submit a written application with a 21 year old cosigner who has the means to pay the balance accrued on the proposed credit card UNLESS you can submit financial information that indicates you have the ability to repay yourself.

SEC. 915. GENERAL-USE PREPAID CARDS, GIFT CERTIFICATES, AND STORE GIFT CARDS. No more dormancy or inactivity fees can be charged unless the card has been unused for 12 months.

SEC. 508. STUDY AND REPORT ON EMERGENCY PIN TECHNOLOGY. Research will be done to determine the cost of creating emergency PIN technology that allows ATM users to input a special PIN if they are being asked to remove money under duress. That PIN will create a call to local law enforcement agencies and the appropriate personnel will be sent to the scene.

SEC. 510. FINANCIAL AND ECONOMIC LITERACY. Research will be done to gather all financial literacy resources made available through federal programs. Once this is done, plans will be made to improve and further support these resources.