The final phase of the Credit Card Accountability Responsibility and Disclosure Act's three phase implementation too effect this past weekend. The law, which was signed by President Barack Obama in May 2009, is designed to restrict credit card company practices that harm consumers. Credit card consumers will now enjoy the following protections:
- Credit card companies will be prohibited from charging penalty fees that exceed the dollar amount associated with the debtor's violation. For example, if the debtor was late on a $25 payment, the credit card company would not be able to charge a penalty fee of $49. Also, credit card companies may not issue penalty fees unless they are "reasonable and proportional to the omission or violation." Of course the definition of what is reasonable and proportional is open to interpretation.
- And in line with the Credit Card Act's attempt to rein in credit card penalty fees, the new also law prohibits credit card companies from charging more than $25 for late fees or other violations against the terms and conditions of using the credit card unless the credit card consumer engages in these violations repeatedly or the violation causes the credit card company to incur costs that are greater than $25. This could really impact debtors who are experiencing financial difficulties and end up paying late or overdraft their credit card repeatedly because of those financial challenges.
- Finally, credit card companies are now prohibited from charging inactivity fees on gift cards. Also, newly issued gift cards cannot expire for at least five years.