Next Monday, February 22, the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 goes into effect, severely restricting the ability of banks and credit companies to unfairly charge consumers.

In a country where the bankruptcy rate soared more than 30 percent last year, this could be a huge boon to the general public - as well as a sharp thorn in the side of creditors.

Signed into law last May by President Obama, the main goal of the CARD Act is to ensure credit availability for financially-strained consumers. At the same time, the government hopes it will make credit card terms less complicated, billing fairer and put a stop to unfair rate increases and questionable charges.

In California, alone, bankruptcy claims soared by more than 46 percent in 2008 and grew by another 37 percent in 2009. Most of these were Chapter 7 bankruptcies, or full liquidation bankruptcy filings which are only available to consumers who do not have the means to repay their debt.

While reports point to the fact that consumers are actively working on lowering their debt and repairing their credit, there is no question that many are pushed up against the wall, financially.

Under the CARD Act, banks and credit card companies are banned from:

  • leveraging unfair and unwarranted rate increases
  • applying retroactive rate increases, where a new rate is applied to an existing balance
  • changing credit terms within the first year of membership
  • engaging in late fee traps - consumers must have at least 21 days to pay their bill after mailing and creditors cannot change due dates from month-to-month
  • charging inactivity fees, unless the card has been inactive for at least 12 months

Banks and credit card companies are also required to write their terms and conditions in a manner that consumers can comprehend and evaluate.

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