Credit Card Default Laws & Regulations

Written by J. Hirby and Fact Checked by The Law Dictionary Staff  

Credit card usage has grown since the first one – Diner’s Card – was issued in 1950. Used for automobile reservations, money transfers and eCommerce, credit cards have continued to progress. Here are the latest updates to credit card default laws and regulations.

“Common Complaints with Credit Cards”

Under the previous laws governing credit cards, the banks could modify the contract by sending the debtor a letter in the mail without enough time to properly respond. Interest rates could be risen very quickly to outrageous amounts. These are some of the problems that have been resolved with the Credit Card Accountability Responsibility and Disclosure Act of 2009.

“Credit Card Accountability Responsibility and Disclosure Act of 2009”

The “Credit CARD Act of 2009” protected consumers against the most egregious practices of the banks. Now, there are more clear cut guidelines as to what banks can and cannot do with your credit card.

From the receipt of your credit card bill, you have 21 days to make your payment. This establishes more uniform guidelines allowing consumers plenty of time to respond. Likewise, you have 45 days to consider changes in the terms and conditions in the fine print of your credit card contract.

No more double-cycle billing on interest rates is allowed. Interest rates can be increased after the promotional time period ends, after one year for a new card or a late payment. Retroactive interest rate increases on existing card balances are also illegal under the new law.

“Universal Default Laws”

“Universal Default” still applies where the entire financial industry shares information about your credit score or late payments. Some credit card companies will check your credit score every month. If you are late on one card or utility bill, other cards can increase your rates.

There are no more early morning due dates permitted. The monthly payment schedule must be uniform. Many credit cards are used for multiple purposes with each having its own interest rate: ATM withdrawals, balance transfers, cash advances and regular purchases. Now, the higher interest rate balances will be paid off first.

If you are “over-limit” the added fees cannot exceed the “over-limit” amount. Upfront fees for subprime credit cards cannot exceed 25% of available credit limit during the first year. There are still Gift Card inactivity fees after 1 year, but the card cannot expire for at least 5 years.

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