The Credit Card Accountability Responsibility and Disclosure Act of 2009 (also known as the Credit CARD Act of 2009) is a federal statute that was enacted by the 111th Congress and signed into law by President Obama on May 22, 2009, to amend the Truth in Lending Act.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 is a consumer protection law that was enacted to protect consumers from unfair practices by credit card issuers by requiring more transparency in credit card terms & conditions and adding limits to charges and interest rates associated with credit card use.
A large part of the Credit CARD Act of 2009 is designed to encourage the flow of information to allow consumers to make more informed choices. For example, the CARD Act requires credit card companies to inform consumers on every statement how long it would take to pay off their debt if they only made the minimum payment. Additionally, the CARD Act requires credit card companies to inform consumers on how they can access their annual credit report.
Prior to the enactment of the CARD Act, credit card companies were free to raise interest rates prospectively on future purchases as well as retroactively on existing balances without notifying borrowers in advance. Under the CARD Act of 2009, credit card issuers must generally wait until an account is at least one year old before raising interest rates and must give notice to the cardholder 45 days before making such an increase, during which the cardholder is free to cancel the account.
Additionally, the CARD Act restricts card issuers from charging interest on balances outside of the most recent billing period, as had previously been the practice of some card issuers. This practice led to some consumers paying interest on balances they had already paid off. Furthermore, the CARD Act requires that all consumer fees be “reasonable and proportional” by adding limits to late fees, annual fees, monthly fees, activation fees, and set-up fees and changing the way companies charge over-limit fees.
The CARD Act also introduced rules for young adults seeking to open credit card accounts by setting a general minimum age requirement to open a credit card without a cosigner - to the age of 21 - subject to exceptions for young adults who prove they are independently able to repay their credit card debt.
[Last updated in July of 2022 by the Wex Definitions Team]