California and Bay Area Consumer Attorneys: Consumer Rights and Bank Credit Cards

ATTORNEY NEWSLETTER

Consumer Credit Card Rights

The Credit CARD Act of 2009: What Consumers Need to Know

The federal Consumer Financial Protection Bureau (CFPB) was designed to protect consumers from certain credit card and consumer loan practices, among the Bureau’s other responsibilities. The Credit CARD Act of 2009, expanded consumer rights around the same time that Congress created the CFPB.[1] The “CARD” in the Act’s title stands for Card Accountability, Responsibility and Disclosure. The Act amended the Truth in Lending Act of 1968, 15 U.S.C. § 1601 et seq., which protects consumers against inaccurate and unfair credit billing and credit card and loan practices. Elsewhere on our website, we list resources and government agencies, including the CFPB, that may be able to help you if you have a dispute concerning your card or bank account: https://www.evanslaw.com/california-and-bay-area-consumer-attorneys-consumer-rights-and-banks-credit-unions-savings-and-loans-and-other-financial-institutions/.  Ingrid M. Evans and the other California and San Francisco consumer, securities, financial elder abuse and annuity and life insurance attorneys at Evans Law Firm can be reached at (415) 441-8669.

Credit CARD Act summary

The Credit CARD Act of 2009 consists of five titles:

1. Title I: Consumer Protection – offers protection for credit cardholders against increases in fees and interest rates, as well as unclear and unduly short notifications about changes. Credit card companies are now required to take into consideration new applicants’ “ability to pay” before approving that applicant for new cards.
2. Title II : Enhanced Consumer Disclosures– revises and expands requirements for mandatory minimum payment disclosures a creditor must provide, such as payoff timing, penalties and renewals, as well as prevention of deceptive marketing of credit reports.
3. Title III: Protection of Young Consumers– prohibits extensions of credit to consumers under the age of 21 unless the consumer has submitted a written application that meets specified requirements. Requires underage applicants to have a cosigner, such as a parent, legal guardian, spouse, or any other individual over the age of 21 who has the means to repay debts incurred by the consumer in connection to the account. 
4. Title IV: Gift Cards –amends the Electronic Fun Transfer Act to declare unlawful legislation governing prepaid and gift cards, as well as gift certificates.
5. Title V: Miscellaneous Provisions – instructs the Comptroller General to conduct a study on the use of credit by consumers, interchange fees, and their effects on consumers and merchants. 

How the Credit CARD Act of 2009 Protects Consumers

The Credit CARD Act of 2009 protects consumers in handful of notable ways, including:

• Account changes: Under the Credit CARD Act, banks may only change interest rates on existing balances if you are 60 days or more late on your monthly minimum payment. In addition, after you make six months of on-time payments, they must restore your original rate.
• Third-party credit reporting: Credit card issuers are no longer allowed to impose penalty rates and fees when a third-party credit bureau reports a default with another lender, including other credit cards.
• Promotional terms: The Credit CARD Act requires promotional rate periods to last at least six months and, with very few exceptions, forbids changes to the purchase rate of any new accounts within the first year.
• Adequate time: The Credit CARD Act mandates that statements be mailed or posted online no later than 21 days before an account’s due date. Credit card companies cannot “trap” consumers by setting payment deadlines on the weekend or in the middle of the day or changing their payment due dates each month.
• Interest cycle: Lenders must calculate interest based only on the balance during a single payment cycle.
• Payment rules: Credit card companies must apply payments to a consumer’s highest interest rate balances first.
• Over-limit charges: Credit card customers now have to be given the choice whether to “opt in” to over-limit charges on their credit card account. If they decline to opt in, they will have their cards declined when a proposed charge or withdrawal would put the balance over the limit, and no fees may be charged in connection with that purchase attempt.
• Financial consequences: Congress challenged credit card issuers to educate consumers by including information about the impact of long-term debt in every account statement. Banks must now calculate how long customers could stay in debt by paying only minimum payments.
• Readability: Instead of “mice type” legal text printed along the sides or bottoms of account materials, banks must now use clear language in an easily readable font to explain products and services. One way issuers accomplish this is through the use of Schumer boxes, a requirement of the original Truth in Lending Act. Named after Charles Schumer, the New York congressman (now senator) responsible for this legislation, Shumer boxes are the easy-to-read tables or “boxes” used by credit card issuers to clearly disclose important rate, fee, and term and condition information.

Remedies for Consumers

Violations of the Credit CARD Act may result in recovery of the following:

• Actual monetary damages.
• Attorneys’ fees and court costs for successful enforcement and rescission actions.
• Statutory damages.
• For individual cases, double the correctly calculated finance charge but not less than $100 or more than $1,000 for individual actions.
• For class actions, an amount allowed by the court with no required minimum recovery per class member to a maximum of $500,000 or 1% of the creditor’s net worth, whichever is less. 15 U.S.C. § 1601 et seq.

[1] As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 124 Stat. 1376.