Certain Aspects of the Credit Card Accountability Responsibility and Disclosure Act of 2009 Become Effective August 20, 2009

On May 22, 2009 President Obama signed into law the Credit Card Accountability Responsibility and Disclosure Act of 2009 ("CARD").  Most of CARD becomes effective nine (9) months after its enactment, which will be February 22, 2010.  Two provisions of CARD do not become effective until fifteen (15) months after enactment which will be August 22, 2010.  However, certain requirements of CARD become effective ninety (90) days after enactment which will be August 20, 2009. 

CARD imposes a number of restrictions and obligations that will impact credit card issuers.  Among other things, CARD

• restricts the ability to increase interest rates
• prohibits retroactive rate increases
• bans certain practices such as double-cycle billing
• puts certain restrictions on penalties and fees
• imposes certain disclosure obligations
• restricts the ability to issue credit cards to college students and other young consumers and provides protections for such consumers

Among the obligations which become effective August 20, 2009 is a requirement that a creditor give at least 45 days prior written notice of rate changes and changes in certain other terms as to a consumer's account and the consumer's right to cancel the account in such circumstances.  In addition, by August 20, 2009, creditors must have adopted reasonable procedures designed to ensure that periodic statements are mailed or delivered to consumers at least 21 days before the payment due date.

The amendments to Regulation Z published by the  Federal Reserve Board on January 29, 2009 further complicate the situation.  Those amendments are to go into effect on July 1, 2010.  There are certain overlaps and inconsistencies between CARD and the amended Regulation Z rules.  The Federal Reserve Board issued an Interim Final Rule on July 15, 2009 which further amends Regulation Z.  That Interim Final Rule becomes effective August 20, 2009 and is  intended to implement the provisions of CARD that are effective August 20, 2009.  The Federal Reserve Board has indicated that it will be issuing further rules to implement the other provisions of CARD.

Hence, compliance with CARD and the amended Regulation Z rules requires a close examination of the CARD provisions and the Regulation Z amendments as well as the Interim Final Rule from the Federal Reserve Board.  Also, it will be necessary to monitor upcoming rule making amendments by the Federal Reserve Board.