The landmark legislation that President Barack Obama signed in the spring of 2009 that was designed to protect consumers from abusive credit card practices took effect today.
This Credit Card Accountability Responsibility and Disclosure Act (CARD) legislation is “leading us away from credit card companies turning penalty fees and deceptive practices into a business model, which is sort of what happened over the last 10 or 15 years,â€ said Austan Goolsbee, a senior White House economic advisor. Card issuers generated $15 billion in penalty fee income last year alone, he said. (Black Enterprise Credit Card Checklist)
About 91.1 million American households, or 78%, had at least one credit card at the end of 2008, and Americans’ credit card debt reached $972 billion that year. In 2009, 15% of Americans, or nearly 34 million people, were late making a credit card payment, and 18 million people missed a payment entirely. But some caution that the new law could backfire, making credit cards more expensive or harder to obtain.
“[Major credit card companies] will probably start to charge annual fees which will allow them to recoup some of that revenue,â€ says Barron H. Harvey, dean at the Howard University School of Business. Companies are going to look for other means to derive revenue that are not covered in the new law, which means card holders will need to be more vigilant in monitoring their issuer, Harvey explains. “If there’s a part of your bill or contract you don’t understand, you’re going to have to call and ask.â€
See key components of the reform here.