Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jan 30, 2020

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In response to the Credit Card Act of 2009, the Federal Reserve Board made recent changes to Regulation Z, the set of rules that implement the Truth-in-Lending Act. These new legal provisions, which became effective on February 22, 2010, change the way your credit card works.

Changes That Require a 45-Day Prior Notice

  • The company must give you 45 days prior notice if they plan to change your fees or terms.
  • Before changes can become effective, the company must give you a chance to opt out.
  • If you opt out, the company can close your account. When they do this, they can require you to repay your balance, either
    • On terms similar to those that were in effect when you rejected the changes;
    • In payments that will pay off the entire balance with interest within five years from the date the proposed change would have gone into effect; or.
    • With a minimum monthly payment that is up to double the percentage of the balance that you are currently required to pay.
  • The company does not have to give you notice of changes that you’ve already agreed to, such as:
    • Your rate increases because it is based on an index;
    • Your introductory rate expires;
    • Your rate increases because you failed to make payments on a workout agreement and the penalty rate kicked in.

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Notice of How Long It Will Take to Pay Off Your Balance

Previously, credit card companies could simply send you a monthly statement that gave your full balance and the minimum payment. If you paid the minimum balance every month, it would take many years to pay it off. Now credit card companies are required to disclose the amount of time it will take you to pay off the card if you make only the minimum payment and also, the amount that you need to pay in order to pay off the balance in three years.

Interest Rates Cannot be Increased During the First Year

Credit card companies cannot increase your interest rate during the first year after you get the card unless:

  • The rate increases because it is tied to an index;
  • It is an introductory rate. This rate must last 6 months, and then the company can switch to the rate disclosed to you when you signed up;
  • You fail to make payments as agreed under a workout agreement.

No Retroactive Rate Increase

Any rate increase that is permitted will not apply to your existing balance, which will continue to accrue interest at the rate that applied before the charges were made.

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No Over-Limit Charges Unless You Agree

  • The company cannot charge you for over- the – limit charges unless you have agreed to allow the institution to do so.
  • If you do not opt-in, the company may decline transactions that take you over your limit.
  • If you do agree to allow over – the – limit charges, the company can only charge you one such fee per billing cycle.
  • You can change your mind and revoke your consent at any time.

25% Limit on Fees

If your card requires you to pay a fee, such as an application fee or an annual fee, it can be no more than 25% of the original credit limit on the account. This does not apply to late fees or over-the – limit fees.

Time to Pay the Bill

  • You will have 21 days from the date the bill is mailed to pay it.
  • The due date will be the same each month.
  • If a payment is due on a weekend or a holiday, you will have until the next business day to pay.

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Highest Interest Gets Paid First

If you pay more than the minimum payment, the extra money goes to pay whichever balance has the highest interest rate.

The above does not pertain to accounts when you have more than one line of credit with different interest rates. It deals with rates on balances that existed before a rate increase (they’re called “protected balances” under the rule). The rate on protected balances can’t be increased, so if the company raises your rate when you owe $400, and then you charge $200 more, you’ll have a protected balance of $400 at the old (lower) rate, and $200 at the new (higher rate), the rule says that if you make a payment that exceeds the minimum payment in a month, it goes to pay the new balance first (because that one is at the higher rate).

No Double-Cycle Billing

Previously, some credit card companies charged interest based on the sum of the average daily balances for two billing cycles. This meant you would have to pay interest on portions of the balance that you may have already paid. The new rules prohibit this practice.

If They Break the Rules

If a creditor violates these rules, you can sue for double the amount of the finance charge and also recover attorneys’ fees. In most cases, you only have one year to sue, so if you think your credit card rights have been violated, you should contact a consumer credit attorney as soon as possible.