On May 22, 2009 the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the Act) was signed into law by President Obama.  It became effective on February 22, 2010 and is intended to protect consumers from changes to the terms of their credit cards that can destroy an unsuspecting consumer who was unaware. 

  The Act provides for the following dramatic changes:

* Credit card issuers cannot increase interest rates on existing credit card balances unless the borrower is at least 60 days late on the account. This will prevent the  credit card issuer from using the universal default clause where credit card issuers could raise interest rates and fees based on defaults on other debts.

* Credit card issuers must provide clear disclosure of account terms before a borrower opens an account. If the account comes with a promotional interest rate period, such rate must last a minimum of six months.

* Credit card issuers cannot raise interest rates on new credit cards during the first year the account is opened, unless the borrower is 60 days late on a credit card payment

* Credit card issuers cannot charge over-limit fees unless they obtain the borrower’s consent to accept and process over-limit transactions beforehand. If the issuer gets consent, the card issuer may not charge more than one over-limit fee per billing cycle and cannot charge an over-limit fee if interest charges or other fees are the only reason the account is over its limit.

* Credit card issuers are prohibited from charging penalties for accepting payments by mail, phone, electronic transfer, or any other method, unless the payment is processed through an expedited service processor.

* Credit Card issuers will be required to determine that borrowers under the age of 21 are able to independently repay the amount borrowed without a co-signor.  

* If a due date falls on a weekend or holiday, the credit card issuer cannot penalize payments that are received on the next business day. Payments received by 5 p.m. must be credited the same day.

* Credit card issuers cannot engage in double-cycle billing, where they use the previous month’s balance to calculate interest charges for the current month.

* Credit card issuers must apply any payment above the minimum amount due to the highest interest balance first.

* Subprime credit cards will have fee limits totaling 25% or less of the credit limit when the account is opened.

* Credit card issuers must provide a written explanation of how long it will take to pay off the existing balance and the total cost in interest fees if the borrower pays only the minimum amount due. Card issuers will also have to provide payment details and the total cost in interest to pay off the balance within 3 years.

* Card issuers must make account terms and cardholder agreements available to borrowers on the internet.

 All of these changes were designed to protect the consumer, and represent a significant departure from the previous law.