Getting to Know the NEW Credit Card Rules

Getting to Know the NEW! Credit Card Rules: Credit CARD Act of 2009

February 22, 2010

Communicate with Consumers CHANGE COMING

Communicate What? When? l l l Interest rate increases Fee Changes Other significant changes 45 Days Notice Required

CA UT Interest Rates ION !

When Changes are Coming: Cance l Card Accept changes ed s a e cr n i Risk ents m pay Decisions

Exceptions Variable interest rate tied to index l Introductory rate expires l Fail to make payments as agreed l 45 - day Notice

Time to Pay Off Balance New balance $3, 000 Minimum payment due $90. 00 Payment due date 9/20/XX Late payment warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 late fee and your APRs may be increased up to the Penalty APR of 28. 99%. Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example: If you make no additional You will pay off the And you will end up charges using this card and each month you pay. . . balance shown on this statement in about. . . paying an estimated total of Only the minimum payment $103 11 years 3 years $4, 745 $3, 712 (Savings +$1, 033)

Rate, Fee and Limit Changes Interest rate increases for the first year

Exceptions l l Variable interest rates Introductory rate ends 60+ days delinquent Non-compliance in workout agreement Exceptions

Increased rates apply only to new charges w e N Increased rates apply Old Do not apply

Over-the-limit (O-T-L) transactions Opt-in l Allows o-t-l transactions l Only one fee per billing cycle l Can be revoked at any time Opt-Out l No o-t-l transactions l No fees if o-t-l transaction slips through

Limits high card fees l l l Annual fees, application fees, etc. Capped at 25% of initial credit limit Example: Card limit $500 x. 25 Max first year fees $125 Exception: Does not apply to penalty fees

Standard Payment Times l l Must receive bill 21 days before due Consistent due date 5: 00 pm cut-off Weekend/holiday provisions

Fair Application of Payments l l l Payments above minimum applied to highest interest rate first Exception: Deferred interest plan Consumers: l l Pay less interest Get out of debt faster

Ends Double-Cycle Billing l l l Two-cycle billing bases finance charges on both the current and previous balance More costly to consumers Finance charges will now be computed only on current cycle purchases

Deceptive Marketing of Credit Reports Advertisements for free credit reports must disclose that free credit reports are available under Federal law at: www. annualcreditreport. com

Restricts Cards to Students l Applicants < 21 must have l l l l Adequate income OR Cosigner OR Completion of certified financial literacy course Restricts credit limit increases Limits prescreened offers Restricts promotional gifts Disclosure of marketing contracts

Establishes Gift Card Protections l l l Five year expiration limit Limits inactivity fees Yields to stronger state laws Covers both retailer gift cards and prepaid general use gift cards Limitations to coverage

Summary: Changes address l l l l Communication requirements Rate and fee increases Balance pay-off data Over-the-limit restrictions Protections for underage consumers Billing and payment structure Deceptive marketing of credit reports, and Gift card protections

Any Questions? For more information about managing money, credit, saving and investing ask about the LSU Ag. Center’s Saving and Investing for Life (SAIL) Program.

References l l l Board of Governors of the Federal Reserve. (2010). What you Need to Know: New Credit Card Rules. Consumer Union. (2009). Upcoming Credit Card Protections. Johnson, C. & Gorham, E. (2009). Credit CARD Act of 2009: The changes and when they take place. Extension Extra. South Dakota State University Extension Service. Mc. Fadden, L. (2009). 8 major benefits of new credit card law. Retrieved from www. bankrate. com 7. 1. 09 Prater, C. (2009). What the new credit card reforms mean to you. Retrieved from www. creditcards. com The White House. (May 22, 2009). Fact Sheet: Reforms to Protect American Credit Card Holders. Retrieved 7/2/09 from www. whitehouse. gov/the_press-office/Fact-Sheet-Reformsto-Protect-American-Credit-Card-Holders

Developed by: Jeanette Tucker, Ph. D. , LSU Ag. Center Visit our Web site www. lsuagcenter. com Louisiana State University Agricultural Center, William B. Richardson, Chancellor Louisiana Agricultural Experiment Station, David Boethel, Vice Chancellor and Director Louisiana Cooperative Extension Service. Paul D. Coreil, Vice Chancellor and Director Pub. 9/09 Issued in furtherance of Cooperative Extension work, Acts of Congress of May 8 & June 30, 1914, in cooperation with the United States Department of Agriculture. The Louisiana Cooperative Extension Services provides equal opportunities in programs and employment.