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New Consumer Laws 2009

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CREDIT CARDS – BANKS LIMITED ON CHANGING ORIGINAL TERMS

Regulation AA, 12 Code of Federal Regulations Part 227

Effective July 1, 2010

This new law amends the federal law (Regulation AA) that regulates how banks treat credit card accounts. These are the most important changes:

Time to make payments – Prohibits banks from treating a payment as late, unless they give the customer a reasonable amount of time to make that payment. (The law does not say what a reasonable time is.)

Allocation of payments – When different annual percentage rates apply to different balances (purchases, balance transfers, cash advances) on a credit card account, banks are required to apply payments exceeding the minimum payment to balances with the highest APR.

Interest rate on existing accounts – Prohibits banks from increasing the interest rate on outstanding balances, unless:

  • The interest rate on the amount owed is variable
  • The promotional rate has expired
  • The bank has not received the minimum payment within 30 days of the due date

Credit card holds – Prohibits banks from charging an over-the-credit-limit fee when the limit is exceeded because a hold was placed on available credit. This can happen when the amount of a transaction was not known in advance, such as when a consumer checks into a hotel and a hold is placed for the entire expected cost of the stay.

Firm offers of credit – Banks that make firm offers of credit advertising multiple APRs or credit limits are required to disclose the factors (credit history, income, debt) that determine whether a consumer will qualify for the lowest APR and highest credit limit advertised.

Due dates for mailed payments – Credit card payments received by 5 p.m. on the due date must be considered timely. If a creditor does not receive or accept mailed payments on the due date (Sunday, holidays), a payment received by mail on the next business day is considered timely.

May be reprinted for non-commercial use if a credit line is included acknowledging the County of Los Angeles Department of Consumer Affairs.

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For more information:
County of Los Angeles Department of Consumer Affairs
B-96 Kenneth Hahn Hall of Administration
500 W. Temple Street * Los Angeles, CA 90012-2706
Telephone (800) 593-8222 (within the County) * (213) 974-1452
Web site: dca.lacounty.gov