CARD Act not a Cure-All for Credit

The Credit Card Responsibility and Disclosure act, otherwise known as The “CARD” act, originated as a result of the credit crisis back in 2009.  Now, a year since the acts inception, the final regulations phase of the CARD act, which was meant to reform the way the credit industry treated credit holders, is now being rolled out. 

We’ve discussed some of the nuances that have come about as a result of the (CARD) act including increased difficulty obtaining credit, especially for those under 21.  The newest phase of regulation institutes minimally helpful stipulations on how companies can treat late payments. 

Credit card issuers are now only allowed to charge $25 or less for an initial late payment and only as much as $35 for a subsequent late payment.  Every six months a card holder goes without a late payment drops the allowed charge to $25 or less.  Additionally, “a late fee may not exceed the delinquent amount.”  For example, you may have recalled being slapped with a $30 late fee on a late minimal payment of $10 in past years.  This policy does do its share to lessen the sting of such a situation.

Now, when card issuers increase interest rates, they must at the very least explain good reasoning for the hike to bank examiners.  Recent (CARD) act rules have also banned card issuers from charging more than one fee (i.e. a late fee along with a returned payment fee) and from charging “inactivity fees.”  

It isn’t much of a surprise that credit card companies have sought new ways to profit off of card holders and collect additional payments.  In fact, there are several new industry “gotchas” that you’ll still need to be aware of as well as older practices, that have not been ratified through the CARD act.  These details will be discussed in detail in a later edition of the Credit CRM blog.  

Credit reform and the CARD act should not be looked at as a cure all or a shield for consumers.  In fact, many old consumer unfriendly practices will continue, and individuals will continue to fall into the trap of bad credit.  Consumers should be aware of what traditional practice of credit issuers as well as what this new wave of practices mean for them and for their credit and continue to engage in responsible credit usage.