Prior to 2009, credit card holders held little control over changes to their accounts. Banks could change terms, increase interest rates, charge exorbitant fees, and all without notifying their clients. If you didn’t like their approach, you only had the option to close your account. Since many people fear how a closed account will negatively affect their credit, consumers were stuck with no real options to change the relationship between them and their banks.
In 2009, Congress passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act. The act laid out a number of fundamental assumptions for credit card offers and terms:
These assumptions placed a number of specific restrictions on actions that the banks could take with their clients.
The CARD Act, which took effect in 2010, features various practical considerations for consumers. They include:
Other applications of the law relate to disclosures and accountability. Credit card companies are required to make information clear and specific, emphasizing particular details such as interest rate changes and fees. They must notify customers of rate increases and give customers the option of closing their accounts as a result. By law, businesses now have to make the terms of their credit cards available online in plain language. Regulators hold the businesses accountable for their practices, and face higher penalties for violations.
One year after the law took effect, the Office of the Comptroller of the Currency surveyed how CARD had changed the environment for credit-card holders. The results were pleasantly surprising. In one year:
Various parts of the government are continually seeking new applications of the law. In 2011, the Federal Reserve Board extended the limits on fees in the first year of a new account to limit fees charged at the account’s opening, such as an application fee. After a federal court rejected this extension, the Consumer Finance Protection Bureau took over administration of the terms of the Card Act. The CFPB stresses that it will work to consistently and effectively enforce the law’s protections.
Credit card offers and terms can sometimes be confusing, but it used to be a whole lot worse. Years after the government offered some basic protections to cardholders, the balance of power is more equal and consumers can feel safer in their relationships with their creditors.
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