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Credit Card Accountability Responsibility and Disclosure Act of 2009

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The Credit Card Accountability Responsibility and Disclosure Act of 2009, was signed into law by President Barack Obama (D). The law established fees and information disclosure requirements for credit card issuers.

HIGHLIGHTS
  • The Credit CARD Act of 2009, which limited how credit card issuers may charge fees to their customers, was signed into law by President Barack Obama.
  • The Consumer Financial Protection Bureau was responsible for the administration of the bill.
  • The Consumer Financial Protection Bureau reported that the law reduced the cost of credit card fees nationwide by over $16 billion between 2009 and 2015.

    • Legislative history

    The Credit CARD Act amended the Truth in Lending Act, the Electronic Fund Transfer Act, the Fair Credit Reporting Act, and mortgage-related provisions of the Omnibus Appropriations Act of 2009. The act was introduced into the U.S. House of Representatives by Representative Carolyn Maloney (D), chair of the House Financial Services Committee's Subcommittee on Financial Institutions and Consumer Credit. The act passed the House 357-70. The U.S. Senate passed an amended version 90-5. The amended version cleared House by a vote of 279-147. President Barack Obama signed the bill into law on May 22, 2009.[1]

    The Federal Reserve Board of Governors initially was responsible for the implementation and enforcement of the Credit CARD Act. However, enforcement of the Credit CARD Act shifted to the Consumer Financial Protection Bureau (CFPB) when the Dodd-Frank Act passed in 2010[2]

    Components

    According to the Consumer Financial Protection Bureau (CFPB), the Credit CARD act established the following provisions:[1][2]

    • Credit card issuers had to give consumers 45 days’ notice for any significant change in terms to credit card accounts.
    • Penalty fees had to be “reasonable and proportional” to a consumers' violation.
    • Issuers could not charge “over the limit” fees unless consumers opted into accepting these fees.
    • Fixed rates could not change.
    • Credit card issuers could not charge fees for accepting payment, unless the payment was expedited.
    • Issuers could not require a fee during the first year that exceeded 25 percent of the entire credit line.
    • Payments had to be due on the same day of every month.
    • Credit issuers could not extend credit without considering the borrower’s ability to repay.
    • Credit card companies cannot charge a late fee that is greater than the minimum payment.
    • Issuers had to provide customers with a monthly statement that told consumers how long it would take to pay off their balance if they only paid the minimum balance.
    • Issuers could not send pre-approved cards to those who were younger than 21.
    • Applicants who were younger than 21 had to prove the ability to repay or have a cosigner.

    According to the CFPB, the law helped reduce the cost of credit card fees by more than $16 billion between 2009 and 2015. In addition, the CFPB reported that available credit increased 10 percent between 2012 and 2015.[3]

    Debate

    Supporters of the act argued that these restrictions were necessary to protect consumers, and that without them companies would unaccountable to their customers. At the signing of the act into law, Senator Carl Levin (D) said the following:[4]

    “ Credit card companies have crossed line after line with outrageous practices that hurt American families and businesses. They underestimated the ability of Congress to turn public outcry into public policy. We faced powerful forces against this effort, but we prevailed. Millions of Americans will benefit now that some balance of power is being restored between cardholders and card issuers.[5] ”
    —Senator Carl Levin

    Opponents of the law argued that the restrictions were unnecessary and would lead to businesses giving less credit. After an amended version of the bill cleared the Senate, Kenneth Clayton, senior vice president for card policy for the American Bankers Association, said the following:[4]

    “ Making this credit available is a very risky business and the committee's action today will unfortunately make it harder -- not easier -- for banks to continue doing so. Credit card lenders of all sizes will likely have to pull back on providing reasonably-priced credit to a wide range of consumers and small businesses. It is hard to see how that makes good policy sense.[5] ”
    —Kenneth Clayton

    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 United States Congress, "H.R.627 - Credit CARD Act of 2009," accessed December 29, 2016
    2. ↑ 2.0 2.1 Consumer Financial Protection Bureau, "CARD Act Report," October 1, 2013
    3. ↑ Consumer Financial Protection Bureau, "CFPB Finds CARD Act Helped Consumers Avoid More Than $16 Billion in Gotcha Credit Card Fees," December 3, 2015
    4. ↑ 4.0 4.1 CreditCards.com, "Obama signs credit card reforms into law," May 22, 2009
    5. ↑ 5.0 5.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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