In 2018, consumers paid almost 104 billion dollars in credit card interest rates and fees. While this amount may skyrocket due to the rise in interest rates and other factors, believe it or not, the government limits the number of fees your lender can charge.
Congress passed the Credit Card Act of 2009 to protect consumers from unfair practices by lenders. Don’t think it made much difference?
We’ll tell you everything you should know about this law and how it limits lender practices. Read on to learn how the government protects you from your lenders.
What Is the Credit Card Act of 2009?
Today, consumers with less than perfect credit have options like this credit card to rebuild their credit. Before Congress passed this law, most lenders used to take advantage of these consumers due to their financial situation.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 is a federal law passed to protect credit card holders from lenders. Before this law, your lender could charge unfair fees and interest rates at their will. Also, lenders could target young consumers by not asking for minimum income requirements and offering gifts to sign up.
The Consumer Financial Protection Bureau (CFPB) is in charge of the enforcement and development of the Card Act of 2009. This agency found that this law helped decrease the cost of credit by 2 percent. While it may not seem like much, limiting lenders helps all consumers achieve their financial freedom sooner.
How Does This Law Protect You?
While EMV technology doesn’t protect consumers from all fraud and cybercriminals, it isn’t the only protection you need as a credit card holder. Lenders used to take advantage of debtors and charge insane fees.
The Card Act of 2009 put limits on your credit card fees. Don’t know how this law protects you? Here are the most important ways this law regulates lenders.
Prohibits Interest Rate Changes
Before the Card Act, a lender could increase interest rates whenever they wanted without notifying consumers. Also, lenders could charge your new interest rates on your existing balance.
Today, you must receive a notification of your interest rate increase at least 45 days in advance. Lenders may only charge your new interest rate on your existing balance if you are 60 days late on your payment.
Yet, they must give you a chance to earn your prior interest rate. You may be eligible for this opportunity if you make on-time payments for the next six months.
Limits Late and Upfront Fees
After this law, lenders can’t charge a late payment fee higher than your minimum payment. They must list this fee and any interest rate penalties on your statement. If your lender will increase your interest rate due to late payment, they must disclose the new rate as well.
The Bottom Line About the Credit Card Act of 2009
Even though lenders still charge you fees that put a dent on your financial freedom journey, the Credit Card Act of 2009 protects all consumers from many lender abusive practices.
If you’re unsure about your current credit card charges, you should take a look at your monthly statement and agreement. Also, you should consider contacting your lender to make sure you aren’t paying any unfair fees.
Achieving your financial goals may seem next to impossible due to your credit card debt. While the Card Act of 2009 lowered your charges, you must get rid of your recurring balances. Want to learn how to pay off your debt sooner?
Read our article to begin your journey toward financial freedom today.