• New Credit Card Regulations to Take Effect on August 20, 2009
  • August 20, 2009 | Author: Matthew Horwitz
  • Law Firm: Frost Brown Todd LLC - Office
  • On May 22, 2009, Congress passed The Credit Card Accountability Responsibility and Disclosure Act of 2009, Pub. L. No. 111-24, 123 Stat. 1734 (2009) (“Credit CARD Act”). The Credit CARD Act amended the Truth in Lending Act (as well as several other statutes) and was enacted to regulate and standardize a number of practices relating to the extension of credit under open-end consumer credit accounts, including credit cards. The Credit Card Act provided the Board of Governors of the Federal Reserve System (“FRB”) with the authority to promulgate regulations to implement the Credit CARD Act.

    The Credit CARD Act’s amendments take effect in three stages, with the first provisions of the Credit CARD Act taking effect on August 20, 2009. On July 15, 2009, the FRB adopted an interim final rule to implement these provisions. Pursuant to the Credit CARD Act and the regulations adopted by the FRB, the following are key regulations that will take effect on August 20, 2009.

    First, under the Credit CARD Act and the FRB regulations, a creditor must provide at least 45 days written notice of any increase in the cardholder’s APR or any other significant changes in the terms of the agreement other than (i) an increase in APR due to a properly disclosed introductory rate, (ii) an increase in a variable rate caused by a change in the index, or (iii) an increase in APR due to the cardholder’s failure to comply with a negotiated workout agreement.

    Second, the 45-day notice described above must be clear and conspicuous and must provide the cardholder with a right to cancel the account before the effective date of the change. The cardholder’s exercise of the right to cancel cannot be deemed to be an event of default and cannot trigger the imposition of any other penalty or fee.

    Third, under the Credit CARD Act, a credit is prohibited from treating a payment as late unless the credit has adopted reasonable procedures to ensure that account statements are delivered no later than 21 days prior to the due date for the payment.

    The second and third stages of the Credit CARD Act’s implementation will take place on February 22, 2010 and August 22, 2010. The FRB, however, will likely publish proposed regulations for such provisions in the near future.