Massachusetts Bankruptcy Blog

After the recent economic downtown, credit card debt came to light as a major financial problem facing a large number of Americans. While some of this debt was accrued through no actions on the part of credit card companies, many debts were increased or made less manageable for consumers due to policies put in place and actions taken by these companies. As a result, the Credit Card Accountability Responsibility and Disclosure (CARD) Act was passed in 2009, offering American consumers a large number of protections from unfair credit practices.

In an effort to keep cardholders’ debt from spiraling out of control or becoming unmanageable for reasons largely beyond their control, this act set in place numerous regulations. Some of the most important benefits that credit card users now have as a result of the CARD Act include the following:

• APR – the Annual Percentage Rate is not allowed to be increased without notifying the person ahead of time and not before one year has passed since the account was opened, except under the following exceptions: the credit card company or bank had announced an increased APR prior to the account being opened, a factor beyond the issuer’s control causes the APR to increase, the payee fails to follow a “workout” agreement that was agreed upon by the issuer and payee, or the payee does not make minimum payments within a sixty day period. If the APR is raised, regardless of the reason, that APR only applies to payments made afterwards. In other words, it cannot be applied retroactively.
• Management of payments – although several types of payment protections were put in place, one of the most beneficial was forcing credit card companies to put any payments made by a consumer towards the debt that had the highest APR, if they had different lines of credit with differing APRs.
• Notifications and disclosures – Many changes were made to policies regarding how and when consumers must be notified of changes or impending action and what they must have disclosed to them. This includes being told at least forty-five days prior to an APR being raised, given the option to cancel within forty-five days of being notified of major changes being made to their plan or agreement, and told the dates payments are due and any fees that will be charged for failing to provide payment prior to that date.

The CARD Act includes a large number of other benefits and protections for American credit card users, many of which may be difficult or confusing for a person to understand. As such, it may be beneficial for a person to speak with a bankruptcy lawyer about how this law affects them, particularly if they are considering filing for bankruptcy due to credit card debt or are wondering if this action would be helpful in their situation.