Amidst a signing ceremony in the Rose Garden of the White House, President Obama today signed into law a bill containing new rules designed to restrict the ability of credit card companies to assess surprise fees, raise rates unfairly, and otherwise make life more difficult for the many American consumers who carry substantial credit card debt.  As designed, credit-related agreements will become more transparent, and accountability will be increased considerably.

Titled the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, the law is controversial for several reasons.   One reason is that an amendment was included that allows people to bring concealed weapons into national parks.  That will undoubtedly be the subject of much commentary and lots of discussion in the blogosphere.  More to the point, though, banks are suggesting that they will end up penalizing good customers that pay their balances in full each month to try to make up for the lost fees and interest resulting from the new law.  Incidentally, the banks have traditionally referred to these “good” customers as “deadbeats” because they generate relatively little revenue for the banks compared with less credit-worthy customer.  It’s a bit early to determine to what degree the card issuers are bluffing, of course.

As I understand them, some of the key points of the new law include:

• College borrowers - Colleges have long been a fertile breeding ground for irresponsible borrowing (and lending), and the schools themselves have often contributed to the problem due to incentives provided them by the card companies. College-aged cardholders are now required to demonstrate that they can re-pay their debt, or they must have a parent or guardian co-sign. In other words, they should meet the basic requirement that any lender should seek to establish before parting with money. Furthermore, agreements between colleges and credit card companies regarding marketing to these students must be fully disclosed.
• Rate increases - Card companies will no longer be able to raise rates on existing balances unless borrowers are 60 days late. If the cardholder subsequently pays in a timely manner for six straight months, the card issuer will be required to reduce the rate back to the original level. The “universal default” concept has now been banned. This describes the case where late payment on one card causes a different card company to raise rates based on the new information that the borrower is a higher risk than he or she had been. The terms agreed to in first year contracts will also remain stable for the entire year.
• Notification - Consumers must now be notified at least 45 days in advance of a rate increase.
• Late fees - Bills must be sent at least 21 days before payment is due. Also, no more deadlines in the middle of the day, weekend due date traps, and due dates that vary month to month.
• Over-limit fees - Currently, consumers sometimes are hit with fees for exceeding their balance because a charge is authorized which pushes the balance above the limit, often without the card user realizing it. The new default behavior will be for the given charge to be denied, unless the cardholder expressly permits it.
• Payments applied to high-rate balances first - Consumers sometimes have different interest rates for a given card, as in the case where a balance transfer was made, or a short-term teaser rate was offered. The standard has been to apply payments to the lower-rate balances. The new law reverses that, such that payments are applied to the balances associated with the higher rate.

For more detailed information, go to the source:  White House website.

Fun facts about credit cards, prior to the new CARD legislation.