The President signed H.R. 627, known as the Credit CARD Act of 2009, into law. This law created new rules for credit card companies. The goal was simple. Lawmakers wanted to protect consumers from unfair credit card practices.

The law also required new guidelines for credit counseling information. Within six months of the law’s passage, regulators had to create rules for a toll-free phone number. This number helps consumers find approved credit counseling and debt management services.

Only nonprofit agencies approved by a U.S. bankruptcy trustee can appear in these referrals. This rule ensures that consumers receive help from trusted organizations.

Ban on Unfair Interest Rate Increases

The law stopped many unfair interest rate increases. Credit card companies can no longer raise rates on existing balances without clear reasons. As a result, consumers gain more stability and confidence in their accounts.

The act also limits retroactive rate increases. Companies cannot raise rates for “any time, any reason” policies or for universal default. These practices once allowed lenders to increase rates suddenly.

Protection During the First Year

The act requires clear contract terms for new credit cards. Companies must explain rates, fees, and terms before opening an account.

In addition, the rules protect customers during the first year. Lenders cannot change key terms during this period. Promotional interest rates remain allowed, but companies must clearly disclose them. These promotional rates must last at least six months.

Fairer Fees for Cardholders

The law introduced stronger protections against unfair fees. For example, credit card companies must give customers enough time to pay their bills. The due date must be at least 21 days after the bill is mailed.

The act also ended common late-fee traps. Companies can no longer set deadlines on weekends or change due dates each month.

Fair Interest Calculations

The law also improved how companies calculate interest. Credit card companies must apply extra payments to the balance with the highest interest rate first.

In addition, the act banned “double-cycle billing.” This practice once used balances from previous months to calculate current interest charges.

Clear and Simple Disclosures

The law requires companies to use simple and clear language. Consumers must understand credit card terms easily.

Before opening an account, companies must show important information. These details include interest rates, fees, and other charges.

Monthly statements must also display key information. For example, statements must show fees paid during the current month and the total paid during the year.

Information About Credit Card Payments

The law helps consumers understand the cost of credit. Monthly statements must show how long it will take to pay off the balance if the customer only makes minimum payments.

Statements must also display how much a person should pay each month to eliminate the balance within 36 months. This information helps consumers make better financial decisions.