Understanding the CARD Act

In 2009, Congress passed the Credit Card Accountability Responsibility and Disclosure Act, giving rise to the convenient acronym, “CARD Act.” The Act is intended to protect consumers from deceptive and abusive practices by credit card issuers. Despite the widespread use of credit cards by residents of Rockland County, very few people are aware of the act or are knowledgeable about its key provisions.

The CARD Act targets two kinds of deceptive practices used by card issuers to obtain new customers. One class of protections is intended to protect persons under the age of 21 from accumulating credit card debts, and especially college students. In one key provision, card issuers are prohibited from visiting college campuses to offer gifts in exchange for completion of a credit card application. Card companies are also prohibited from mailing solicitations for credit card accounts to persons under the age of 21 unless they have specifically agreed to receive such solicitations.

The Act also banned a particularly abusive practice in which a card issuer would persuade a person to sign up for an account regardless of the person’s ability to pay. Many people who obtained accounts in this way were unable to keep up with minimum payment requirements, and they then accrued late fees and other charges. Card issuers cannot issue cards to anyone under the age of 21, and the issuer must now assess the ability of the prospective card holder to make required payments. Also, card issues can only impose one charge per billing cycle.

The Consumer Financial Protection Bureau was created in part to oversee administration and enforcement of the CARD Act. The CFPB has succeeded in reducing fraudulent practices on the front end of the credit card agreement, that is, ensuring the full and accurate disclosure of the terms of the account and penalties for late payments.