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SUMMARY AS OF: 5/20/2009 Public Law

Credit Card Accountability Responsibility and Disclosure Act of 2009 or the Credit CARD Act of 2009

(Sec. 2)

Authorizes the Board of Governors of the Federal Reserve System (Federal Reserve Board) to issue rules and publish model forms to implement this Act.

(Sec. 3)

Makes this Act effective nine months after its enactment.

Title I: Consumer Protection

(Sec. 101)

Amends the Truth in Lending Act (TILA), with respect to credit card accounts under an open end consumer credit plan, to require a creditor to provide written notice not later than 45 days prior to the effective date of:

• any increase in an annual percentage rate (APR)
• and any significant change, as determined by rule of the Federal Reserve Board, in the terms of the cardholder agreement (including an increase in fees or finance charges)

Prohibits a creditor from increasing any annual percentage rate (APR) of interest, fee, or finance charge applicable to the existing balance on an open end consumer credit card account unless specified conditions are met. Allows a creditor to increase an APR, fee, or finance charge only if the increase is due solely to:

• expiration of a specified time period (e.g. promotional period) disclosed clearly and conspicuously to the consumer before commencement of the time period
• a change in index not under the creditor's control
• payment not received during the 30-day grace period after the due date
• or completion of a workout or temporary hardship arrangement, or the consumer's failure to comply with such an arrangement

Prohibits any APR increase relating to such an arrangement from exceeding the APR applicable to the particular category of transactions on the day before the effective date of the arrangement. Prohibits a creditor from changing the terms governing repayment of an outstanding balance; but permits the creditor to provide the obligor with specified repayment methods. Requires a creditor that increases the APR based upon factors including the obligor's credit risk, market conditions, or other factors to:

• consider changes in such factors in subsequently determining whether to reduce the APR for such obligor
• and reduce the APR when a review indicates a reduction

Declares that no increase in any APR, fee, or finance charge, with certain exceptions, shall be effective before the end of the one-year period beginning on the date on which the account is opened. States that, in the case of a promotional rate, no written notice of an increase in the APR shall be effective before the end of a six-month period beginning from the date the promotional rate takes effect.

(Sec. 102)

Prohibits imposition of a finance charge, with certain exceptions, upon a credit card account balance that is based on balances for days in billing cycles preceding the most recent billing cycle (double billing cycle) as a result of the loss of any grace period. Prohibits penalties for on-time payments. Prohibits the charge of an over-the-limit fee unless the consumer expressly permits the creditor to complete the relevant transaction (opt-in). Allows imposition of an over-the-limit fee only once during a billing cycle. Prohibits its imposition more than once in two subsequent billing cycles with respect to such excess credit, unless the consumer:

• has obtained an additional extension of credit in excess of the credit limit during any such subsequent cycle
• or reduces the outstanding balance below the credit limit as of the end of such billing cycle

Prohibits a creditor from imposing a separate fee related to the method of payment (by mail, electronic transfer, telephone authorization, or other means), unless the payment involves an expedited service by the creditor's service representative.

Requires any penalty fee or charge to be reasonable and proportional to the omission or violation involved. Directs the Federal Reserve Board to establish standards for assessing whether the amount of any penalty fee or charge is reasonable and proportional to the omission or violation to which the fee or charge relates.

(Sec. 103)

Limits the use of the term "fixed," in conjunction with an APR or applicable interest rate, to a rate that will not change or vary for any reason over the period specified clearly and conspicuously in the terms of the account.

(Sec. 104)

Revises requirements governing crediting of payments. Requires a card issuer, upon receipt of payment, to apply amounts in excess of the minimum payment amount first to the balance bearing the highest rate of interest, and then to each successive balance bearing the next highest rate of interest, until the payment is exhausted. Requires a creditor to allocate the entire amount paid in excess of the minimum payment to a balance on which interest is deferred during the last two billing cycles immediately preceding the expiration of the period during which interest is deferred. Prohibits a card issuer from imposing any late fee or finance charge for a late payment if:

• the issuer makes a material change in the mailing address, office, or procedures for handling cardholder payments
• and such change causes a material delay in the crediting of payment made during the 60-day period following the date on which such change took effect

(Sec. 105)

Prescribes a standard for the initial issuance of subprime or "fee harvester" cards (accounts requiring first-year fee payments in excess of 25% of the total amount of credit authorized). Prohibits payment of any fee from the credit made available by the card (other than any late fee, over-the-limit fee, or any fee for a payment returned for insufficient funds).

(Sec. 106)

Requires the payment due date to be the same day each month, or the next business day if such date falls on a weekend or holiday. Revises requirements for the timing of payments and the grace period. Requires each periodic statement of payment due to be mailed no later than 21 days before the payment due date.

(Sec. 107)

Revises civil penalties for creditor noncompliance with TILA. Includes in such penalties twice the amount of any finance charge in connection with a transaction, between $500 and $5,000 (or a higher amount in the case of an established pattern or practice of noncompliance), in the case of an individual action relating to an open end consumer credit plan that is not secured by real property or a dwelling.

(Sec. 109)

Requires a card issuer to consider the ability of the consumer to make required payments as a prerequisite to opening any consumer credit card account, or increasing any credit limit.

Title II: Enhanced Consumer Disclosures

(Sec. 201)

Revises and expands requirements for mandatory minimum payment disclosures a creditor must furnish. Directs the Federal Reserve Board to issue guidelines, by rule, for the establishment and maintenance by creditors of a toll-free telephone number for purposes of providing information about accessing credit counseling and debt management services.

(Sec. 202)

Revises requirements relating to late payment deadlines. Requires specified disclosures relating to increases in interest rates for late payments. States that the date on which the obligor makes a payment at the local branch of a creditor financial institution shall be considered to be the date on which the payment is made for purposes of determining whether a late fee or charge may be imposed due to the failure of the obligor to make payment on or before the due date for such payment.

(Sec. 203)

Requires a card issuer that has changed or amended any term of the account since the last renewal that has not been previously disclosed to make such a disclosure to the consumer by a certain deadline.

(Sec. 204)

Requires creditors to post on an Internet site the written agreement between the creditor and the consumer for each open-end consumer credit plan.

(Sec. 205)

Amends the Fair Credit Reporting Act to require any advertisement for a free credit report to disclose prominently that free credit reports are available under federal law at AnnualCreditReport.com (or other authorized source).

Title III: Protection of Young Consumers

(Sec. 301)

Amends TILA to prohibit extensions of credit to consumers under age 21, unless the consumer has submitted a written application that meets specified requirements. Requires any such application to be signed by a cosigner, including the parent, legal guardian, spouse, or any other individual who has attained the age of 21 having a means to repay debts incurred by the consumer in connection with the account.

(Sec. 302)

Amends the Fair Credit Reporting Act to permit a consumer reporting agency to furnish a consumer report regarding credit or insurance transactions that are not initiated by the consumer only if the report does not contain a date of birth that shows that the consumer has not attained the age of 21, or, if the date of birth on the consumer report shows that the consumer has not attained the age of 21, the consumer consents to the furnishing of such report.

(Sec. 303)

Amends TILA to require approval by the jointly liable party to increase credit lines for accounts for which a parent, legal guardian, spouse of the consumer, or any other individual is jointly liable.

(Sec. 304)

Requires an institution of higher education to disclose publicly any agreement made with a card issuer or creditor for the purpose of marketing a credit card. Prohibits a card issuer or creditor from offering to a student at an institution of higher education any tangible item as inducement to participate in an open end consumer credit plan if such offer is made:

• on or near the campus of the institution
• or at an event sponsored by or related to such institution.

Expresses the sense of Congress that each institution of higher education should consider adopting the following policies relating to credit cards:

• that any card issuer that markets a credit card on the campus notify the institution of the location at which such marketing will take place
• that the number of locations on the campus at which the marketing of credit cards takes place be limited
• and that credit card and debt education and counseling sessions be offered as a regular part of any orientation program for new students

(Sec. 305)

Requires each creditor to submit an annual report to the Federal Reserve Board containing the terms and conditions of all business, marketing, and promotional agreements and college affinity card agreements with an institution of higher education, or with an affiliated or related alumni organization or foundation, with respect to any college student credit card issued to a college student at such institution. Directs to the Federal Reserve Board to report to Congress, and make available to the public, on the information concerning credit card agreements submitted to it by each institution of higher education, alumni organization, or foundation. Directs the Comptroller General to review and report to Congress about the mandatory reports submitted by creditors as well as their marketing practices to determine the impact that college affinity card agreements and college student card agreements have upon credit card debt.

Title IV: Gift Cards

(Sec. 401)

Amends the Electronic Fund Transfer Act to declare unlawful:

• the imposition of a dormancy fee, an inactivity charge or fee, or a service fee with respect to a gift certificate, store gift card, or general-use prepaid card
• and the sale or issuance of a gift certificate, store gift card, or general-use prepaid card that is subject to an expiration date

Title V: Miscellaneous Provisions

(Sec. 501)

Instructs the Comptroller General to study and report to Congress on use of credit by consumers, interchange fees, and their effects on consumers and merchants.

(Sec. 502)

Directs the Federal Reserve Board to review biennially and report to Congress on specified aspects of the consumer credit card market. Directs the federal banking agencies and the Federal Trade Commission (FTC) to report annually to the Federal Reserve Board, for inclusion in its annual report to Congress, on their regulatory activities regarding credit card issuer compliance with federal consumer protection statutes and regulations.

(Sec. 503)

Directs the Secretary of the Treasury to issue regulations implementing the Bank Secrecy Act regarding the sale, issuance, redemption, or international transport of stored value, including stored value cards.

(Sec. 504)

Amends TILA to direct the Federal Reserve Board to prescribe regulations to require creditors to establish procedures to ensure that any administrator of the estate of any deceased obligor can resolve outstanding credit balances of the estate in a timely manner.

(Sec. 505)

Directs the Federal Reserve Board to report to certain congressional committees on the extent to which creditors have reduced credit limits or raised interest rates applicable to credit card accounts based on specified factors, including the geographical location of a credit transaction, the identity of the merchant involved, the consumer's credit transactions, and the identity of a consumer's mortgage creditor.

(Sec. 506)

Directs the Federal Reserve Board to review and report to Congress on:

the use of credit cards by small businesses with not more than 50 employees
and the credit card market for such businesses

(Sec. 507)

Directs Administrator of the Small Business Administration (SBA), in conjunction with the Secretary of Homeland Security, to establish the Small Business Information Security Task Force to:

• address the information technology security needs of small business concerns
• and help them prevent the loss of credit card data

Requires the task force to make recommendations to the SBA Administrator about establishment of an Internet website to receive and dispense information and resources with respect to:

• the information technology security needs of small business concerns
• and the programs and services provided by the federal government, state governments, and nongovernment organizations (NGOs) that serve those needs

Requires the task force to make recommendations also relating to developing additional education materials and programs with respect to information technology security needs. Authorizes appropriations for FY2020-2013.

(Sec. 508)

Directs the FTC to study and report to Congress on the cost-effectiveness of making technology available at an automated teller machines (ATM) that enables a consumer under duress to alert a local law enforcement agency electronically that an incident is taking place at the ATM.

(Sec. 509)

Directs the Comptroller General to study and report to Congress on the terms, conditions, marketing, and value to consumers of products marketed in conjunction with credit card offers.

(Sec. 510)

Directs the Secretary of Education and the Director of the Office of Financial Education of the Department of the Treasury to coordinate with the President's Advisory Council on Financial Literacy to report to Congress on:

• their evaluation and compilation of a comprehensive summary of existing federal financial and economic literacy education programs
• and development of a strategic plan to improve and expand financial and economic literacy education

(Sec. 511)

Amends the Omnibus Appropriations Act, 2009 to direct the FTC to initiate a rulemaking on unfair or deceptive acts or practices with respect to mortgage loans, loan modification, and foreclosure rescue services. Denies the FTC authority to promulgate a rule regarding an entity that is not subject to its enforcement powers. Authorizes a state, as parens patriae, to bring a civil action on behalf of its residents if the state attorney general believes that an interest of state residents is threatened or adversely affected by action of any person subject to an FTC-prescribed rule in a practice that violates such rule.

(Sec. 512)

Prohibits the Secretary of the Interior from promulgating or enforcing any regulation that prohibits an individual from possessing a firearm, including an assembled or functional firearm, in any unit of the National Park System (NPS) or the National Wildlife Refuge System (NWRS) if:

the individual is not otherwise prohibited by law from possessing the firearm
and the possession of the firearm complies with the law of the state in which the NPS or NWRS unit is located

(Sec. 513)

Requires the Comptroller General to study and report to Congress on:

• the relationship between fluency in the English language and financial literacy
• and any extent to which individuals whose native language is a language other than English are impeded in their conduct of their financial affairs
  
  

Full text of Credit CARD Act of 2009 in pdf format

Summary

The Credit CARD Act of 2009 placed a number of restrictions on the abilities of credit card companies to change the conditions of the agreement between it and the credit cardholder.  It also set rules on gift cards. In addition to these items, there was an amendment to this legislation that address the ability of a citizen to carry a firearm on a national park or reserve. 

This summary:

• shows the voting history for the legislation
• lists the provisions which affect consumers
• displays informational and other videos about the act
• discusses the amendment passed with the bill which affects gun laws on national parks

Votes concerning this legislation

The legislation originally passed the House on April 30, 2009 with a vote of 357-70. All but one Democrat voted in favor of the legislation, and the Republican vote was split with 105 supporting and 69 opposing.

The passage of the legislation through the Senate was much more bi-partisan.  On May 19, 2009,  the bill passed the Senate by a vote of 90-5.

The final vote of significance took place on May 12, 2009 when the Senate voted to pass Amendment 1067. This is the amendment that allowed citizens to carry firearms on national parks. This amendment passed 67-29.

Organization of legislation

The Credit CARD Act of 2009 was divided into 5 titles:

• Consumer protection
• Enhanced consumer disclosures
• Protection of young consumers
• Gift cards
• Miscellaneous Provisions

Effective Date

The bill states that the act and the amendments shall go into affect 9 months after the enactment of the act, except where the act specifically states otherwise. The law was signed into affect by President Obama on May 22, 2009, putting everything not otherwise stated into effect on February 22, 2010. The law effects not only new contracts, but also those already is existence.

Consumer protection

Protection of credit cardholders - Advance notice of rate increase

Credit card companies must provide written notice to the credit card holder at least 45 days prior to an increase in the annual percentage rate (APR). This same notice is required for any other significant change, including an increase in any fee or finance charge (other than those stated in paragraph 1 of the contract). The written notice to the card holder must be in clear and conspicuous language and the right of the card holder to cancel the policy prior to the effective date of the changes must be clearly stated. If the cardholder chooses to cancel the account, that closing must not trigger an obligation to immediately pay the balance in full or in any method less beneficial to the card holder.  No fee or penalty can be imposed. This portion of the bill was scheduled to go into affect 90 days after the enactment of the legislation, on August 22, 2009.

 Protection of credit cardholders - Limits on rate increases

Creditors may not change the rates on a consumer after the consumer has used to card to make purchases. It prohibits the increase of any annual percentage rate, fee, or finance charge which applies to an outstanding balance.

This prohibition does not apply if it falls upon the expiration of a specified period of time, provided that prior to that period, the creditor disclosed to the consumer the time period and rate increase, the rate does not exceed this previously disclosed rate, and the increased rate does not apply to charges made prior to the enactment of that rate. The increase is also allowed if the credit card agreement provides for changes in the rate according to the operation of an index that is not under the control of the creditor and is available to the general public, the increase is due to the completion of a temporary hardship arrangement or due to the consumers failure to comply with a hardship arrangement, or the increase is solely because the creditor has not received a payment within 60 days of the due date.  In the final case, the increase must terminate no later than 6 months after it starts, if payments are received on time.

This means that your rate cannot be increased if your payment was received late, but only a few days late.  Your payment must be 60 days late to allow for a rate increase. Since it is not allowed as a reason for raising rates, creditors are not allowed to look at a default or late payment on another account to justify raising the rates on their account.

Protection of credit cardholders - Outstanding balance

Any increase in rates is not allowed to affect an outstanding balance.  The creditor can change no terms on an existing balance except to provide a payment schedule which pays off the full amount in 5 years from the date of any increase. Any payment required during this time must include a percentage of the outstanding balance that is not more than twice the percentage of the outstanding balance previously required.

An outstanding balance is defined as the amount owed on the credit card at the end of 14 days after notice is given that the rates will be increasing.

Protection of credit cardholders - Reduction in rates

If a credit card company increases the rates on a consumer due to factors such as the risk of the obligor and market conditions, then it must consider changes in those factors at a later date in determining if the rates should be lowered. The creditor must maintain reasonable methodologies in assessing those factors, must reassess the accounts at least every 6 months, and must lower the previously increased rates when the review indicates a return to previous conditions.

Protection of credit cardholders - Introductory rates

No increase to an APR, fee, or finance charge can be made in the first year except for the case previously stated. No increase in any rate due to a promotional rate can be effective before the end of the 6 month period after the introduction of such a rate.

Limits on fees and interest charges - Double cycle billing

The creditor is not allowed to impose a fine, fee, or charge interest in the balance of funds prior to the current billing cycle. This prevents the use of previous months balance to increase the amount of interest charged.  The creditor is also not allowed to charge interest or a fee for a balance that is charged and then paid off in the same billing period. An exception is given for fees on return of payment for insufficient funds.

Limits on fees and interest charges - over-the-limit transactions

The creditor may not allow the consumer to achieve a balance above their limit and then charge the consumer a penalty, unless the consumers has elected to allow such a fee. If the consumer agrees to this fee, it can only be charged once in a billing cycle and only once in each of the two subsequent billing cycles.

Limits on fees and interest charges - methods of payment

No additional fee may be levied depending on the method of payment

Prompt and fair crediting of payments

The creditor must apply any amount in excess of the minimum payment to the account with the highest interest rate first. The cardholder may not impose a fee or fine if they make a change in their billing address and that change causes a delay in the reception of payments.

Subprime or fee harvester accounts

If a fee required in the first year of a contract is in excess of an aggregate amount of 25 percent of the amount of credit originally available on the account, that payment may not be made on the credit available from the account. 

Periodic statement

The due date for a credit card must be the same day each month. If the due date falls on a holiday or a day that the creditor does not receive mail, the creditor must accept the payment on the following business day without it being considered late. The consumer must have 21 days between the time they receive the statement and the due date of the payments.

If a grace period is allowed where the consumer may repay a portion of credit without finance charge, then no finance charge can be made on that credit throughout the entire billing cycle.

This section went into affect 90 days after the enactment of the legislation.

Penalties

Revises the penalty amount that can be applied to a creditor to twice the amount of any finance charge between $500 and $5000.

Consideration of ability to repay

States that creditors must take into account, the ability of the consumer to repay the debt, before credit can be issued.

Enhanced Consumer Disclosures

Payoff timing disclosures

The creditor is required to display a statement on the billing page that making the minimum payment will increase the amount of interest you pay and the time it takes to pay off the debt. The creditor is also required to display a table on the main billing page indicating the number of months it will take to pay off the debt if they make the minimum payments, the total cost to the consumer including interest and principal, and the monthly payments required to pay off the balance of the debt in 36 months.

Late payment deadlines and penalties

The due date for any payment must be listed on the billing page, along with the penalty for missing that due date. Any increase in rate due to missing this due date must also be noted in an obvious location. If the creditor maintains local branches that allow payments to be made on debts, the dates that those payments are made at the local branch are to be considered the payments dates.

Renewal disclosures

Requires that the creditor disclose any change to the account since the last renewal

Internet posting

Requires that creditors display a written agreement between them and the consumer on an internet site.

Prevention of deceptive marketing

Requires that any advertisement for a free credit report display prominently that a free report is available at annualcreditreport.com.

Protection of young consumers

Extension of credit to underage consumers

No credit card can be issued to someone under the age of 21, unless a co-signer above the age of 21 consents and the person under the age of 21 can be shown to have an independent means of repay the debt.

Prescreened credit offers

Prohibits the issuing of credit reports to anyone besides the consumer, if that consumer has not reached the age of 21, unless the consumer consents.

Issuance of cards

Prevents an increase to a credit limit on a card that a parent or other party is jointly liable for, without the consent of the jointly liable party.

Privacy protections

Any institution of higher education must disclose any contract or other agreement made with the card issuer or creditor. No card issuer or creditor may of any tangible item in exchange to apply or participate in a credit program if that offer is made on the campus, near the campus, or at an event sponsored by the institution.

College credit card agreements

Requires creditors to submit annual reports concerning the interactions between the credit card company and colleges. This includes funds paid for access to students, the number of accounts generated by projects affiliated with the colleges, and any communication between the colleges and creditors.

Gift cards

Makes it illegal to impose a dormancy fee, inactivity fee, or service fee on a gift certificate, store card, or general use pre-paid card. Makes it unlawful to issue such a card with an expiration date.

FDIC Video

The FDIC released a video not long after the passing of the legislation which discusses the provisions in the bill.

youtube_id_video=bbDxTS7R_m0

Suze Orman video

Just after the bill passed, Suze Orman discussed the bigger points of the legislation.

Support from Senator Bayh

Senator Dodd floor speech

In May of 2009, Senator Dodd spoke in favor of the legislation on the Senate floor.  He details some of the provisions of the legislation.

Amendment 1067

Days before the passage of the credit card legislation, an amendment was passed which had been submitted by Senator Coburn of Oklahoma that sought to ensure that Americans could carry firearms within national parks. The text of that amendment is shown below.

SA 1067. Mr. COBURN proposed an amendment to amendment SA 1058 proposed by Mr. Dodd (for himself and Mr. Shelby) to the bill H.R. 627, to amend the Truth in Lending Act to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes; as follows:

At the appropriate place, insert the following:

SEC. __. PROTECTING AMERICANS FROM VIOLENT CRIME.

(a) Congressional Findings.--Congress finds the following:

(1) The Second Amendment to the Constitution provides that ``the right of the people to keep and bear Arms, shall not be infringed''.

(2) Section 2.4(a)(1) of title 36, Code of Federal Regulations, provides that ``except as otherwise provided in this section and parts 7 (special regulations) and 13 (Alaska regulations), the following are prohibited: (i) Possessing a weapon, trap or net (ii) Carrying a weapon, trap or net (iii) Using a weapon, trap or net''.

(3) Section 27.42 of title 50, Code of Federal Regulations, provides that, except in special circumstances, citizens of the United States may not ``possess, use, or transport firearms on national wildlife refuges'' of the United States Fish and Wildlife Service.

(4) The regulations described in paragraphs (2) and (3) prevent individuals complying with Federal and State laws from exercising the second amendment rights of the individuals while at units of--

(A) the National Park System; and

(B) the National Wildlife Refuge System.

(5) The existence of different laws relating to the transportation and possession of firearms at different units of the National Park System and the National Wildlife Refuge System entrapped law-abiding gun owners while at units of the National Park System and the National Wildlife Refuge System.

(6) Although the Bush administration issued new regulations relating to the Second Amendment rights of law-abiding citizens in units of the National Park System and National Wildlife Refuge System that went into effect on January 9, 2009--

(A) on March 19, 2009, the United States District Court for the District of Columbia granted a preliminary injunction with respect to the implementation and enforcement of the new regulations; and

(B) the new regulations--

(i) are under review by the administration; and

(ii) may be altered.

(7) Congress needs to weigh in on the new regulations to ensure that unelected bureaucrats and judges cannot again override the Second Amendment rights of law-abiding citizens on 83,600,000 acres of National Park System land and 90,790,000 acres of land under the jurisdiction of the United States Fish and Wildlife Service.

(8) The Federal laws should make it clear that the second amendment rights of an individual at a unit of the National Park System or the National Wildlife Refuge System should not be infringed.

(b) Protecting the Right of Individuals to Bear arms in Units of the National Park System and the National Wildlife Refuge System.--The Secretary of the Interior shall not promulgate or enforce any regulation that prohibits an individual from possessing a firearm including an assembled or functional firearm in any unit of the National Park System or the National Wildlife Refuge System if--

(1) the individual is not otherwise prohibited by law from possessing the firearm; and

(2) the possession of the firearm is in compliance with the law of the State in which the unit of the National Park System or the National Wildlife Refuge System is located.