getting to know the credit card rules: credit card act of 2009 new!

Getting to Know the

Credit Card Rules: Credit CARD Act of 2009

NEW!

February 22, 2010

Communicate with Consumers

CHANGE

COMING

Communicate What? When?

Interest rate increases Fee Changes Other significant changes

45 Days Notice Required

CAUTION!

Interest Rates

When Changes are Coming:

Decisions

Cancel Card

Accept changes

Risk increased

payments

Exceptions Variable interest rate

tied to index Introductory rate

expires Fail to make

payments as agreed

45- day Notice

Time to Pay Off BalanceNew balance $3,000Minimum payment due $90.00Payment due date 9/20/XX Late payment warning: If we do not receive your minimum payment by the

date listed above, you may have to pay a $35 late fee and your APRs may be increased up to the Penalty APR of 28.99%.

Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example:

If you make no additional You will pay off the And you will end up

charges using this card and balance shown on this paying aneach month you pay. . . statement in about. . . estimated total of

Only the minimum payment 11 years $4,745$103 3 years $3,712 (Savings +

$1,033)

Rate, Fee and Limit Changes

Interest rate increases for the first year

Exceptions

Variable interest rates Introductory rate ends 60+ days delinquent Non-compliance in workout agreement

Exceptions

Increased rates apply only to new charges

New Old

Increased rates apply

Do not apply

Over-the-limit (O-T-L) transactions

Opt-Out No o-t-l

transactions No fees if o-t-l

transaction slips through

Opt-in Allows o-t-l

transactions Only one fee per

billing cycle Can be revoked at

any time

Limits high card fees

Annual fees, application fees, etc. Capped at 25% of initial credit limit

Example:

Card limit $500

x .25

Max first year fees $125

Exception: Does not apply to penalty fees

Standard Payment Times

Must receive bill 21 days before due Consistent due date 5:00 pm cut-off Weekend/holiday provisions

Fair Application of Payments

Payments above minimum applied to highest interest rate first

Exception: Deferred interest plan Consumers:

Pay less interest Get out of debt faster

Ends Double-Cycle Billing

Two-cycle billing bases finance charges on both the current and previous balance

More costly to consumers Finance charges will now be computed only on

current cycle purchases

Deceptive Marketing of Credit Reports

Advertisements for free credit reports must disclose that free credit reports are available under Federal law at: www.AnnualCreditReport.com

Restricts Cards to Students

Applicants < 21 must have Adequate income OR Cosigner OR Completion of certified financial literacy course

Restricts credit limit increases Limits prescreened offers Restricts promotional gifts Disclosure of marketing contracts

Establishes Gift Card Protections

Five year expiration limit Limits inactivity fees Yields to stronger state laws Covers both retailer gift cards and prepaid

general use gift cards Limitations to coverage

Summary: Changes address

Communication requirements Rate and fee increases Balance pay-off data Over-the-limit restrictions Protections for underage consumers Billing and payment structure Deceptive marketing of credit reports, and Gift card protections

Any Questions?

For more information about managing money, credit, saving and investing ask about the LSU AgCenter’s Saving and Investing for Life (SAIL) Program.

References

Board of Governors of the Federal Reserve. (2010). What you Need to Know: New Credit Card Rules.

Consumer Union. (2009). Upcoming Credit Card Protections.

Johnson, C. & Gorham, E. (2009). Credit CARD Act of 2009: The changes and when they take place. Extension Extra. South Dakota State University Extension Service.

McFadden, L. (2009). 8 major benefits of new credit card law. Retrieved from www.Bankrate.com 7.1.09

Prater, C. (2009). What the new credit card reforms mean to you. Retrieved from www.CreditCards.com

The White House. (May 22, 2009). Fact Sheet: Reforms to Protect American Credit Card Holders. Retrieved 7/2/09 from www.whitehouse.gov/the_press-office/Fact-Sheet-Reforms-to-Protect-American-Credit-Card-Holders

Developed by: Jeanette Tucker, Ph.D., LSU AgCenter

Visit our Web site www.lsuagcenter.comLouisiana State University Agricultural Center, William B. Richardson, ChancellorLouisiana Agricultural Experiment Station, David Boethel, Vice Chancellor and DirectorLouisiana Cooperative Extension Service. Paul D. Coreil, Vice Chancellor and DirectorPub. 9/09Issued in furtherance of Cooperative Extension work, Acts of Congress of May 8 & June 30, 1914, in cooperation with the United States Department of Agriculture. The Louisiana Cooperative Extension Services provides equal opportunities in programs and employment.