The credit card industry was in great need of a revamp as a result of which the Obama Administration introduced new regulations related to credit cards to minimize irregularities that exist in the credit card industry. Credit card debts have been increasing at an alarming rate. Common complaint of the credit cardholders is that the credit limits were reduced and payment policies were changed much to the surprise of the credit cardholders. The changes that were introduced by the credit card issuers were not communicated to the customers. This led to the increase in the number of credit card defaults.

The credit card reform or Credit Card Accountability, Responsibility and Disclosure also known as Credit CARD Act, 2009 was enacted to address the needs of the credit cardholders.

Changes that will take place as per new credit card regulations

The following changes will be taking place in the credit card industry following the enforcement of the law that is expected to take effect in early 2010.

• Consumer has to be informed at least 45 days prior to bringing about hike in the interest rates
• Consumers below 21 years and who intend to get a credit card will be required to prove their income and have a co-signer. Alternatively, he or she will have to undergo a literacy course to own a credit card.
• The consumers will have to be given a “reasonable” time for repayment. The due date of the credit card bill will be 21 days after the consumer receives the bill statement.
• The credit card reform is expected to do away with universal default
• If a consumer is making payments, the entire amount will not be used in assigning the amount to the debt accounts that have lower interest rate. Instead, the excess amount that remains after making the minimum payments will be assigned to the debt account that has the highest interest rate.
• The credit card issuers are required to provide extensive information to the consumers about the consequences in case the consumer is making only the minimum payments every month.
• In case consumers having bad credit opt for credit card, the consumer will be given a subprime credit card. People with subprime credit cards are charged account opening fees that erodes a major portion of the available balance. As per the new credit card regulations, the upfront fees should not be more than 25% of the credit limit that is available during the first 12 months.

The new credit card regulations are expected to bring in some relief for the credit card holders and do away with the monopoly of the credit card issuers.