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Credit Card Act of 2009 & You
Everyone will need to rebuild their credit score
Important Credit Score Issues
• Credit History• Percentage of Credit Used• Payment History• New Request For Credit
Consumer Rights Before 2010
• Dispute the Purchase• No Liability for Fraudulent Purchasers• Control over Payment Options
I am writing to dispute a billing error in the amount of $______on my account. The amount is inaccurate because the merchandise I ordered was not delivered.I ordered the merchandise on (date) . The merchant promised to deliver the merchandise to me on (date), and the merchandise was not delivered.
Abuses That Led to 2009 Credit Card Act
• Universal Default• Changes in Billing Cycles• No Changes without Adequate Notice
– Interest rates– Fees– Cash transfer charges
Three Major Dates
• August 2009
• February 2010
• July 2010
August 2009
• Credit Card Companies must provide written notice to consumers 45 days before:– Increase in Annual Percentage Rate– Change of terms on the account– Change benefits or “Rewards” structure
August 2009
• The same notice must inform the consumer of their right to cancel the card account BEFORE the new interest rate goes into effect.
• All open ended consumer credit accounts must mail or deliver periodic statements 21 days before payment is due.
February 2010
• Retroactive interest rate increases are banned unless the cardholder is more than 60 days late.
• Payments exceeding the minimum payment are to be applied to the balance with the highest rate or pro rata among all balances
• If your interest rate has been increased your account must be reviewed after 6 months
• If you have paid on time the interest is returned to the previous rate
Feb 2010 Continued
• Interest rates cannot be increased during the first 12 months.
• Teaser or promotional rates must last 6 months
• The issuer must tell you all interest rates that will be applied to the account at the time it is opened– The initial rate may expire. You must be told the final rate
and if that rate is a variable rate
February 2010 Continued
– After the first year the bank can increase the interest rate for new transactions after giving 45 days notice
– The bank may increase the rate if a minimum payment is received more than 30 days late
• No universal default or double cycle billing• No “over credit limit” fees unless specifically
allowed by the consumers
2010 Feb One more time
• Bill to be sent at least 21 days before due • Payments received by 5 P.M. credited same
day • Enhanced consumer disclosure
– How long to pay if only the minimum is paid– Total cost if only minimum is paid– Clear late payment date and time
Subprime Credit Cards
• It is subprime if– Upfront fees must be paid– Tied to savings or checking– Credit Limit fluctuates with the balance of the
linked account– Has a very high interest rate
Rules for subprime credit cards must be disclosed
Protection of Young Consumers
• Credit Cards cannot be issued to someone under 21 years of age without a co-signer and/ proof of income
• Under 21 years of age a co-signers permission needed to raise limit
• No pre-screened credit card offers unless they opt-in
July 2010
• New format for the summary table• Creditors must disclose the duration that
penalty fees may be in effect• Simplified disclosures on costs, variable rates
and grace periods• Revisions to periodic statement format• Must disclose “Effective Annual Percentage
Rate”
So What
• Changes in Rules = Actions by Creditors• Actions by Creditors = Changes to Consumer’s
Credit • Changes to Consumer’s Credit = Change in
Credit Score• Changes in Rules = Change in Credit Score• Project that Credit Scores will decline• Cost of Credit goes up
What’s a Consumer to Do
• Pull free credit report• Verify status of all accounts• Dispute all mistakes• Make sure debt equals less than 25 to 30% of
amount of credit available to you• Try to keep oldest and best accounts open• Begin a rebuild immediately • New turn around time is 2 years
Gift Cards
• Gift cards must be active for at least 5 years• Fees must be disclosed to buyers• No dormancy or inactivity fees unless the card
has been inactive for a 12 month period• Cards that expire after 5 years the terms must
be clearly disclosed
Websites
• WWW.fdic.gov• WWW.whitehouse.gov• WWW.DSEF.org• www.bankrate.com/calculators/credit-score-
fico-calculator.aspx
