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Credit Card Accountability Responsibility and Disclosure Act

Protections For Cardholders In Nevada

In the wake of the 2008 economic collapse, congress passed legislation aimed at reforming certain predatory practices of the credit industry and increasing consumer awareness of credit card risks and costs.

Signed into law May of 2009, the Credit Card Accountability Responsibility and Disclosure Act (or CARD act), implemented higher standards of transparency and disclosure for credit card companies, and limited the way these companies could charge consumers.

The CARD Act has had many practical impacts upon the ways in which credit card companies charge consumers and what information consumers are given access to when opening a credit card account or applying for a credit card.

Some of the most important changes of the CARD Act include:

1. Limiting Interest Rate Increases

In keeping with the CARD Act's stated goal to establish “fair and transparent” practices in the credit industry, one of the most important changes precipitated by the enactment of the new law was to clarify and limit the ways in which credit card companies raised interest rates.

Since the enactment of the CARD Act, credit card companies are now required to give notice of any increase in APR at least 45 days in advance of the increase, which offers the consumer sufficient time to cancel the account if they find the new interest rate unfavorable.

Additionally, the CARD Act placed limitations on the way interest rate hikes may affect existing balances. Before the implementation of the CARD Act, it was a common practice of credit card companies to retroactively apply increases in interest rates retroactively to affect existing balances. Therefore, purchases made by the consumer under the assumption that the interest rate would remain static were subject to the increased interest rate.

Under the CARD Act, interest rate hikes can only retroactively apply to past purchases if the cardholder has missed two consecutive payments.

2. Reducing Late Fees

One of the primary ways that credit card companies profited from cardholders was through the application of frequently exorbitant late fees. These fees could often be severe and disproportionate to the minor offense of paying a credit card balance a few days late.

The CARD Act reined in the old late fee regime significantly. Under the new law, credit card companies are no longer able to charge exorbitant late fees for past due payments. Rather, any late fees charged by a credit card company must be “reasonable and proportional” to the violation of the terms (i.e. the lateness of the payment).

The agency responsible for implementing regulations related to the CARD Act has established guidelines for what amount constitutes a reasonable and proportional late fee – $25 for a first time late fee and $35 for a second violation.

Additionally, rather than penalizing cardholders for payments that are only slightly late, the CARD Act requires that cardholders generally have at least 21 days to pay their bill before late fees may be charged.

3. Reducing Overdraft Fees

The CARD Act put an end to a common practice of credit card providers designed to penalize cardholders with overdraft fees.

Under the old regime, if a cardholder made a purchase that exceeded the cardholder's credit limit, the credit card transaction would still be processed and the cardholder's credit would be extended in order to accommodate the purchase. However, the extension of the cardholder's credit limit came with a cost.

Typically, the cardholder would be charged a fee for exceeding the original credit limit. Additionally, for each month that the cardholder was unable to make payments sufficient to bring the balance under the original credit limit, the cardholder would continue to be charged the overdraft fee. This created a difficult cycle to break whereby the cardholder would continue to be charged for the original overdraft month after month.

Under the CARD Act, a for an overdraft fee to be applied, the cardholder has to explicitly opt-in to allow any charges over the credit limit to be processed. Additionally, no more than one overdraft fee may be charged per billing cycle.

4. Establishing Disclosure Requirements For Credit Card Costs

Since the passage of the CARD Act, credit card companies are required to make more complete and transparent disclosures regarding the total amount of interest charged to date and the amount charged in fees.

In keeping with the Act's goal to increase transparency about the real costs of credit cards and interest, the CARD Act mandates that certain types of information be presented on each bill. For instance, the CARD Act requires that each monthly statement contains the amount of time it would would take to pay off the remaining account balance and the total cost to the cardholder if the cardholder was to make only the minimum payment each month.

The CARD Act also requires that monthly statements provide cardholders with the amount the cardholder would have pay each month in order to pay the complete balance within three years.

5. Establishing Consistent Billing Standards

The CARD Act implemented changes to many common billing practices of credit card companies. Before the CARD Act, credit card companies would typically send a bill 14 days before the bill was due.

Under the CARD Act, they are required to send a bill at least 21 days before it is due, thereby affording the consumer additional knowledge of how much is owed and giving them flexibility to plan on paying the bill.

Under the CARD Act, monthly due dates are required to be consistent and cannot vary from month-to-month and any bills received before 5:00 pm on the due date will be considered timely.

Why Should I Hire An Attorney?

Because of the relative positions of cardholders and credit card companies, both Nevada law and Federal law afford significant protections to consumers who have been preyed upon by lenders, debt collectors, and creditors. The financial industry is heavily regulated and there are specific laws that must be followed by individuals and companies who provide financial services to consumers.

If you believe that the behavior of a creditor or lender has been predatory and that your rights as a consumer have been violated, contact 702-DEFENSE to discuss the specifics of your case today.

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