What is the Credit CARD act?
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The Credit CARD act is legislation governing the behavior of credit card companies in the United States. The self-stated purpose of the Act is "To amend the Truth in Lending Act to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes." The Act is more formally known as the Credit Card Accountability, Responsibility, and Disclosure Act of 2009.
The Act stipulates requirements under five titles:
- Title I specifies regulations for consumer protection. This section, for example, states that a credit card company cannot raise the interest rate on new accounts within the first 12 months and can only raise interest rates on existing balances under clearly defined circumstances.
- Title II specifies enhanced customer disclosures. This section, for example, mandates that customers must be given 45-day notice of any significant changes, such as fee increases, and any rights of the customer to opt in or out of programs.
- Title III specifies further measures to protect young customers. This section, for example, makes it illegal for credit card companies to offer free items to college students in exchange for completing credit card applications.
- Title IV specifies requirements for gift cards. This section, for example, requires that if there is an expiration date, that date must be disclosed before to the purchaser before the sale is completed.
- Title V specifies miscellaneous requirements not covered under the first four titles. This section, for example, establishes a plan for a formal study of consumer credit use.
Penalties for non-compliance with the Credit CARD act range from $500 to $5000 per infraction.
The Credit CARD Act was signed into law by President Obama on May 22, 2009 and goes into full effect February 22, 2010.