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UK Credit Card Reform to Follow US CARD Act?

Posted on 22. Feb, 2010 by emilythomas in In The News

Starting today, American credit card companies must comply with many provisions of the CARD Act (Credit Card Accountability, Responsibility and Disclosure Act). Some provisions of the CARD Act were enacted 6 months ago and some were today.

CARD Act Key Points:

• Card issuers generally must give card holders 45-day notice of significant changes to the terms of their cards, including interest rate increases and changes to certain fees like annual or late fees. Furthermore, credit card companies must give you the option to cancel your card before such changes take effect.
• Monthly credit card bills must be mailed (or made available online for people who have opted to receive paperless statements) at least 21 days before payment is due and must have a consistent due date month to month.
• Monthly credit card statements must include information about how long it will take you to pay off your balance if you make only minimum payments and how much you would need to pay each month  to pay off your balance in three years.
• For the first year after you open an account, your credit card company now cannot generally increase your interest rate.
• After the first 12 months since opening a new credit card account, rate increases can apply only to new charges.
• If you make a transaction that would take you over your credit limit, your credit card company must turn it down unless you have told them to allow such transactions. This means that over-the-limit fees are likely to become less common unless you specifically tell your card issuer to allow transactions that would put you over your limit.
• If you do opt for over-the-limit transactions, you can be charged only one fee for them per billing cycle.
• Credit card companies can impose interest charges on balances only in the current billing cycle.
• Fees like annual or application fees cannot total more than 25 percent of the initial credit limit and
• Credit card companies cannot impose fees for the method in which customers pay their bills.
• Upfront subprime card fees will also now be more limited.
• To open a credit card account, people under the age of 21 will now need either a co-signer or evidence that they have enough income to make monthly payments.
• Credit card companies can no longer market cards on college campuses.

Will US credit card reform now be followed by reform in the UK? According to a BBC News article, proposals for reform include:

• changing the order of priority for credit card repayments, so that the most expensive debts, such as cash advances, are paid off first
• increasing the minimum amount that must be paid off each month to accelerate the overall rate of repayment
• banning the practice of raising borrowers’ credit limits without their consent
• restricting or banning increases in interest rates on debts already incurred

Click here to read more about credit card reform in the US. And for more about UK credit card regulation click here.

Tags: CARD Act, credit card news, Credit Cards, credit cards uk, In The News, UK credit cards