Some may wonder if its redundant to pass legislation that’s similar to regulation already imposed by banking regulators, but regardless, the newly minted Credit Card Accountability, Responsibility, and Disclosure Act of 2009 has been signed into law.

Here’s the breakdown on the changes when the law comes into effect February 22, 2010.

Consumer Protection

  • Retroactive interest rate increase are banned except when a cardholder is more than 60 days late paying a credit card bill.
  • Credit card issuer must review the cardholder’s account six months after increasing the interest rate, and return the APR to the previous lower level if the cardholder has been on-time with payment.
  • Interest rate cannot be increased within the first 12 months, and promotional rates must have a minimum of 6 months in duration.
  • Advance notice of 45 days prior to significant changes in credit card terms: this includes the benefits and reward structure of a credit card.
  • The practice of universal default and double-cycle billing are no longer allowed.
  • Over credit limit fees are now prohibited unless consumers specifically agree to allow transaction to go through instead of being denied.
  • Bills must be sent out no later than 21 days before the due date.
  • Payments cardholder makes must be credited as on-time if the payment is received by 5 P.M. on the due date.

Enhanced Consumer Disclosures

  • Clear disclosure on how long it would take to pay off a credit card balance if cardholder makes only the minimum payment each month.
  • Clear disclosure on the total cost in interest and principal payments if a cardholder makes only the minimum payment each month.
  • Late payment deadline and postmark date are required to be clearly shown and disclosed to cardholders.

Protection of Young Consumers

  • Credit cards cannot be issued to people under the age of 21 unless they have an adult co-signer or show proof that they have the means to repay the debt (proof of reasonable income).
  • College students will be required to receive permission from parents or guardians in order to increase credit limit on joint accounts they hold with those adults.
  • People under the age of 21 will now be protected from pre-screened credit card offers unless they specifically opt-in for offers.

Gift Cards

  • Gift cards are now required to remain active for at least five years from the day of their activation.
  • Dormancy or inactivity fees on gift cards can no longer be imposed unless there have been no activity in a 12-month period.
  • Dormancy or inactivity fees must be clearly disclosed to gift card buyers.
  • If the gift card expires after 5 years, the terms of expiration needs to be clearly disclosed to gift card buyers.

Effective Date

  • The majority of the new rules will be taken into effect 9 months after the signing of the bill, which puts the effective date on Feburary 22, 2010.
  • The rule on 45 days advance notice of major changes in account terms will take effect 90 days after the bill’s enactment, beginning September 2009.
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