Credit Reform Act

There are over 6 hundred million credit cards in use in America and on an average each card holder has about 3.5 cards. These numbers have indicated that people in the US rely heavily on credit cards and that is the main motivation for the credit reform act. The recent economic recession has prompted the administration to help people who have mounting credit card debt. Under the credit reform act the government has taken measures to protect the consumers from being exploited by credit card companies.

Card companies for long have been arbitrarily changing the terms of contract without giving the customers any notification. Almost 10 percent of the credit card companies total income is made through late fees and penalties. Credit card companies had been using dubious terms like 'fixed rate' and 'prime rate' to entice and over charge customers. The credit reform act aims at putting a curb on these practices and help people get out of credit card debt.

Credit Card Reform Act

The Credit Card Accountability Responsibility and Disclosure Act of 2009 is also referred to as the Obama credit reform bill because it was one of the first things he did after coming to office. A large percentage of the population who used credit cards were under debt and needed a national debt relief initiative to get out of debt. Some of the measures taken under the credit reform act 2010 are:

Interest Rates
Under the Obama credit card debt relief program credit card companies have been restricted from changing the rate of interest without notifying the client. If the company wishes to change the interest rates they are required to inform the customer 45 days in advance. The cardholders have the right to decline the new rates and pay off existing debts at the old interest rate.

Due Dates
The Obama credit relief act also stipulates that card companies send billing statements to clients 21 days prior to the due date. The act also states that the due date fall on the same day every month, and if it falls on a weekend or official holiday it be shifted to the next business day. As per the Obama credit reform bailout plan card companies also have to make readily available a telephone number and e-mail address for communication.

Fees and Penalties
The credit card reform act requires the card companies to review the payments of customers every six months. After review if it is found that the customer is making timely payments then the interest rate charged should be revised. The act also prevents double cycle billing, which means card companies cannot charge penalties on an account which has payments made during the grace period.

Consumer Protection
The credit reform act restricts credit card companies from selling cards to consumers who are less than 21 years of age, unless the consumer has proof of income documents. Credit card relief act also requires card companies to have their contracts online and keep them readily available for government scrutiny. The size of the font to be used for the terms on the contract is also decided by the administration.

The credit reform act also gives the card holder the right to decide the credit limit which cannot be surpassed. It also puts restrictions on the fees that can be charged on cards that go over the limit and mandates card companies to give details regarding 'minimum payment'.