Credit Card Act of 2009

Monday, June 11, 2012 at 3:46pm by Site Administrator

Credit Card Act of 2009: The Impact on Small Businesses

President Barak Obama signed the Credit Card Accountability, Responsibility and Disclosure Act into law on May 22, 2009. The new law, commonly known as the Credit CARD Act of 2009, places limits and restrictions on the way credit card companies may do business, as well as the charges that the companies may assess to consumer accounts. The historic bill gained bipartisan support in Congress. Most lawmakers were in agreement that the credit card industry was in need of reform. The new law took effect in February 22, 2010, forcing banks to comply with the new regulations.

An assessment by the Consumer Financial Protection Bureau (CFPB) at the one year anniversary of the enacted law revealed that the changes have had a positive impact for consumers. A few of the major changes to the way credit card companies may legally do business include:

  • Credit card companies may no longer change the interest rate on an existing balance unless the payment is delinquent by 60 days or more. This means that credit card companies cannot offer an introductory rate and then change the rate if the card holder is late on one payment.
  • Introductory and promotional rates must remain in place for at least six months. In addition, the issuing bank may not raise the regular rates of the card for one year after the account is activated.
  • Credit card bills must be issued and sent to the card holder at least 21 days before the payment is due.
  • Credit card issuing banks may not charge over-the-limit fees unless the card holder has approved the charges in advance. Instead, credit card companies must deny approval to charges that will take the account over the limit. Card holders may agree to allow over-the-limit charges. In these cases, the account may be charged an over-the-limit fee.
  • Any payment over the minimum payment due must first be applied to the balance with the highest interest rate.
  • Those individuals who are under 21 years of age must have a co-signer or demonstrate that they have the means to pay the credit card bill. In addition, credit card companies may no longer recruit new accounts on college campuses.
  • Credit card account holders must be notified 45 days in advance regarding any changes to the terms of the credit card account.

Additional changes have also been imposed on credit card issuing banks, though these are the most notable. The Credit CARD Act of 2009 brought sweeping changes and welcome reform to the credit card industry. The Act is a step in the right direction for protecting consumers against unfair charges and questionable practices.


The Effect of the Credit CARD Act of 2009 for Small Business Owners

The Credit CARD Act of 2009 was a necessary and welcome set of regulations to protect consumers. However, these changes only affect personal credit card accounts. Business credit cards are not included in the new regulations.

For small business owners, the law applies only if the business owner utilizes their own personal credit cards for business expenditures. For this reason, small business owners may want to consider the pros and cons of applying for a business credit card. With the Credit CARD Act of 2009 protecting only personal credit card accounts, many small business owners may fare better simply by using their personal cards for their business.

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