By Jessica Borders
Times West Virginian
FAIRMONT — The Credit Card Accountability, Responsibility and Disclosure (CARD) Act is an effort to protect consumers and help them make better decisions.
Congress passed the Credit CARD Act, with both the House and Senate showing great bipartisan support, and President Barack Obama signed it into law in May 2009. Many of the rules established through this expansive credit card reform legislation officially took effect last week on Feb. 22.
During a conference call that day, two White House officials talked about the major credit card reforms brought about through the act. Michael Barr, assistant treasury secretary for financial institutions, and Austan Goolsbee, senior economic adviser to the president, addressed regional media and answered questions.
The law is designed to ensure that credit card contracts are informative rather than confusing, to keep hidden fees from showing up, and to stop the changes in payment deadlines, terms and interest rates.
In a statement following the implementation of the bill, the president commented that these efforts marked “a significant turning point for American consumers.”
“The new rules are an unprecedented step in my administration’s ongoing efforts to strengthen consumer protections and enact meaningful financial reform,” Obama said.
“These new rules don’t absolve consumers of their obligation to pay their bills, but they finally level the playing field so that every family and small business using a credit card has the information they need to make responsible financial decisions.”
Goolsbee said the law concentrates on rates and fees, disclosure and transparency, and prohibiting deceptive practices.
Credit card companies are now required to provide advanced notice of 45 days if increasing rates and fees and allow customers to switch to another card if they wish, he said. Creditors must give adequate disclosure so they can be held accountable. The law also establishes some caps on high annual fee cards.
Barr added that card companies have to send out statements 21 days prior to the due date, instead of 14, and they aren’t allowed to just switch when the payment is due. This will help people who are trying to act responsibly to pay their bills on time.
He said the Credit CARD Act also addresses the problem of credit card companies implying that making the minimum payment is the responsible course. Creditors need to let customers know that by only paying the minimum, they are increasing the amount they owe over time. Clients should be aware of how long it will take them to pay off the debt and how much interest they will incur.
In addition, card companies can no longer engage in two-cycle billing or double-cycle billing. This means they can only impose interest on charges in the current billing cycle, Barr said.
The law includes new rules to protect underage consumers and make sure that young people have a way of paying their credit card bills, he said.
While these rules went into effect on Feb. 22, “the president is still focused on broader financial reform,” Barr said.
He said Obama has proposed a new consumer financial protection agency to enforce the Credit CARD Act and to ensure that the country stays on top of problems in the credit card sector. This will help create a level playing field across the marketplace.
“It’s really critical for us to have a strong consumer protection agency,” Barr said. “What we’ve put in place is a set of rules that permit good, strong competition.”
Barr talked about the importance of creating more transparency on the operations of credit card companies and the credit restraints in the market today.
“Across the board, we have just gone through the biggest credit crunch since 1929,” Goolsbee said. “The basic thing that’s going on in the marketplace today is a credit contraction.”
Goolsbee agreed that it’s necessary to take steps to guarantee that credit is flowing in appropriate ways.
“It is a way of letting competition occur based on quality and price and not on (unfair) practices,” he said.
With the help of the Credit CARD Act, families will be more informed and able to decide what’s best for them, Goolsbee said.
“They’ll have the information they need,” he said. “They’ll be empowered to make that choice. The costs are going to be upfront and you’re going to be able to see and decide (if you want to incur those costs).”
E-mail Jessica Borders at jborders@timeswv.com.
