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What consumer protections exist related to credit card debt?

When consumers begin to struggle under significant credit card debt, they often feel powerless against the credit card companies. However, there are certain laws that specifically limit certain actions by credit card companies and impose specific duties. One of the primary laws that protect users of credit cards is the Credit CARD (Card Accountability Responsibility and Disclosure) Act that was passed in 2009. All of the provisions contained in the Act are now in effect.

In general, the provisions of the CARD Act relate to interest rates, making payments, credit card fees, card disclosures, ability to repay and protections for young adults. With regard to interest rates, the Act has several key protections for consumers. First, card companies must provide at least 45 days notice before changing a card's interest rate, and the card company must give the cardholder the ability to reject the changes in the interest rate. In addition-with the exception of situations involving default-the CARD Act prohibits card companies from raising interest rates on existing balances or from raising rates for the first year after a consumer acquires the card.

With regard to making payments, the Act requires card companies to deliver the bill at least 21 days before a payment's due date. This allows consumers a reasonable time to make payments. This provision also prevents companies from charging late fees if the bill is not delivered 21 days prior to the due date and prevents the charging of interest during grace periods. The fee provisions also prevent the charging of fees for exceeding the credit limit unless a consumer agrees to the card company's authorization of transactions that exceed the limit. Upfront fees are also limited to a certain percentage (no more than 25%) of the credit card limit, and the company cannot charge fees for making a payment.

In an effort to provide more information to consumers regarding the terms of their credit cards, the CARD Act mandates that card companies must provide clear disclosures related to interest rates; transaction, annual and penalty fees; and minimum charges to new accountholders. The card company must also provide a clear statement of the due date and any late fees, as well as information regarding the length of time needed to pay off the balance if only minimum payments are made. Finally, credit card companies are no longer permitted to issue a new card or increase a consumer's credit limit without considering his or her ability to repay, and card companies cannot issue cards to adults under 21 unless certain conditions are met.

Source: NYC Department of Consumer Affairs, "Consumer Alert: New Protections for Credit Card Users," last accessed Mar. 22, 2015

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