On Friday, May 22, President Obama signed into law the Credit Card Accountability, Responsibility, and Disclosure Act (Credit CARD Act, H.R. 627), a series of sweeping new credit card industry reforms aimed at protecting consumers. If you haven’t had a chance to review the specifics of this legislation, the Washington Post printed a summary breakdown of how the law will affect consumers. http://www.washingtonpost.com/wp-dyn/content/graphic/2009/05/26/GR2009052600983.html?referrer=emaillink

The law codifies many of the regulatory changes the Federal Reserve Board announced in December 2008, but these now carry the weight of law, rather than regulation. According to the Consumer Federation of America, the Credit CARD Act is expected to “curb some of the most arbitrary, abusive and unfair credit card lending practices that trap consumers in a vicious cycle of debt,” including retroactive interest rate hikes, universal default on existing balances, double-cycle billing, excessive penalty fees, and more. Most of these changes will take effect by February 22, 2010.

Questions are being raised about possible unintended consequences of this legislation:

* Could some portions of the bill result in making credit more expensive and harder to get at a time when many Americans need it?

* Will we see a new “crop” of fees and practices in the near future to replace those banned by the legislation?

* Will issuers say they have to raise the upfront cost of credit cards, and pare back rewards programs?

* To make up for some of the lost revenue because of the new restrictions, will responsible consumers with good credit and who pay in full each month be subjected to fees they previously didn’t pay?

As educators, financial counselors, financial professionals, and users of credit, we need to keep a watchful eye on how this legislation plays out—for our constituents as well as for ourselves.

Jan Garkey 
CUNA & Affiliates

June 08, 2009

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