The Credit Card Act of 2009 resulted in credit card companies making various changes to their consumer credit application process, promotional rates, and fee structure. A recently approved amendment to the CARD Act attempts to further protect consumers from overextending their credit, changing terms of promotions and being charged excessive fees.
On March 18, 2011, the Federal Reserve approved a rule amending the Truth in Lending section (Regulation Z) of the Credit Card Act. The new amendment will impact application requirements, promotional programs and fees.
The Credit Card Act amendment approved on March 18 says that credit card companies cannot use the applicant's "household income" as the basis for approval of a new credit card or setting of a credit limit. The Federal Reserve said in a press release that issuers must request the individual applicant's "income or salary" since the term "household income" is considered "too vague."
Balance transfer promotions
Consumers who use balance transfer cards will have added protection. The Fed's amendment clarifies that the same rules apply to credit card companies during a promotional period as at any other time. In other words, if a balance transfer offer waives all interest charges for six months, that offer cannot be revoked or changed, and interest cannot be charged unless the account is more than 60 days delinquent.
Credit card fees
The CARD Act states that credit card fees cannot exceed 25 percent of the account's initial credit card limit during the first year that the account is open. Now the Federal Reserve has clarified that this limitation also applies to application and account fees paid before the account is opened.
As an example, if a consumer opens an account with a credit limit of $500, the credit card company cannot charge more than a total of $125 in fees within the first year. If the applicant was charged $75 as an application fee, the customer cannot be charged more than $50 in additional fees during the first year the account was active.
The CARD Act is intended to protect customers from being overcharged by credit card companies and from getting into more credit card debt than they can handle.