The CARD Act: The Good, the Bad And the Ugly


President Obama signed the Credit Card Accountability, Responsibility and Disclosure Act of 2009, Pub. L. No. 111-24, on May 22, 2009. It is now referred to as the CARD Act. The act’s primary purpose is to end the allegedly unfair treatment of cardholders by banks that issue credit cards. Some of the act’s provisions became enforceable Aug. 20, many went into effect Feb. 22 and some will become effective Aug. 22.

The following summarizes the more significant CARD Act provisions, including their pros and cons, and what they mean to consumers.


More Advance Notice of ‘Significant’ Changes in Terms

Credit card issuers are now required to notify cardholders 45 days in advance of any interest rate increases or other significant changes. Account closures or decreases in credit limits are not defined as “significant” and thus do not require advance notice from the card issuer. This is true unless the decision to adversely change the terms was based on the consumer’s credit reports or credit scores, where the Fair Credit Reporting Act requires notice, albeit not in advance. The provision also does not require the consumer to acknowledge receipt of the 45-day advance notice. This provision, however, does allow the cardholder to cancel the card and pay off the debt at the lower rate, which allows for less expensive debt reduction but can lower the cardholder’s credit scores because of the loss of available credit.

Extended Grace Periods

Credit card issuers are now required to mail cardholder statements at least 21 days before their due dates. The previous requirement was 14 days. This provision allows WESTLAW JOURNAL BANK & LENDER LIABILITY 2 ©2010 Thomson Reuters consumers to avoid late fees by providing a longer grace period. For consumers who receive and pay their credit card statements online, it equates to a true 21-day grace period because the mail timing is eliminated. Additionally, payments received the day after a weekend or holiday due date cannot result in any penalty to the cardholder (this is a Feb. 22 provision).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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