More Consumer Protection on the Way: The Creation of the Consumer Financial Protection Agency

It turns out that the Credit CARD Act of 2009 – a series of reforms in the credit card industry aimed at eliminating or mitigating unfair and abusive practices – was only the initial salvo of a legislative campaign aimed at benefiting consumers.

At this point in the economic recession, just about everyone agrees that our financial regulatory system needs a serious overhaul. President Obama is taking an important step with the creation of a new consumer protection agency — the Consumer Financial Protection Agency (CFPA) — that will be the cornerstone of financial reform.

The proposed agency’s powers and oversight would extend to home mortgages, credit cards, consumer loans, and other consumer credit services. The agency’s first charter would be to create consumer-friendly, uniform disclosure to all home purchase and financing transactions, like ‘good-faith’ estimates and truth-in-lending statements.

The proposed CFPA puts consumer concerns front and center, rather than as a tangential issue. Designed to rule credit and loan institutions, the agency would be a toothier watchdog for financial institutions who are long accustomed to cozy relationships with the institutions meant to regulate them. Such cozy relationships are a big part of our current financial predicament, and the whole reason Obama and Representative Barney Frank (D-MA) are such major proponents of the agency.

BillShrink fully supports the creation of the CFPA. After all, we’re a company dedicated to saving people money by providing apples-to-apples comparisons on costs of their everyday bills.

Bottom line: In the everlasting conflict between big business Goliath and the little David, it’s about time David got some backup.

photo credit: amycgx

Details: Credit Card Accountability Responsibility and Disclosure Act of 2009

With an exciting and attention grabbing name as titled above, how can you ignore the Senate’s Credit Card Accountability Responsibility and Disclosure Act of 2009? (Also known as The Credit C.A.R.D Act of 2009. I know, super original).

“But wait, BillShrink Guy,” you ask, “Didn’t the Fed just pass new credit card regulation last year? And didn’t the House just pass a credit card Bill of Rights last month? What’s with all these different laws and regulations? My head hurts, and I just want my credit card to be nice to me.”

I’m glad you asked that question, and like you, I just want my credit card to play nice too.

The Credit CARD Act of 2009 brings stronger protection to the table for all of us. Here’s a clear-cut list of additional changes the just-passed Senate bill provides:

Interest rate increase protection. A card’s Interest rate can no longer be raised on a cardholder unless the account is 60 days late.  The increased rate will have to be restored to the previous level if a cardholder pays on time for six months.  An interest rate cannot be increased within the first 12 months, and promotional rates must be a minimum of 6 months.

Advance notice of term changes. Credit card companies will now have to notify customers with a 45 days advance notice of any significant changes to the terms of their credit card, this now includes changes to benefits such as reward structures.

Limiting credit cards to younger adults. The legislation bans credit cards for people under the age of 21 unless they have an adult co-signer or show proof that they have the means to repay the debt.  College students will be required to receive permission from parents or guardians to increase credit limit on joint accounts they hold with those adults.

Reduction on gift card hidden fees. Gift cards are now required to remain active for at least five years from the day of activation.  Dormancy or inactivity fees on gift cards can no longer be imposed unless there has been no activity in a 12-month period.  The dormancy fee has to be disclosed clearly to gift card buyers.

Proper notification of bill and processing of payments. Credit card companies must send your bill out no later than 21 days before the due date.   Payment must be credited as on-time if payment is received by 5 P.M. on the due date.

The Senate’s Credit CARD Act of 2009 will now most likely be consolidated along with the House’s Credit Cardholder’s Bill of Rights Act of 2009 and be signed into law by President Obama before the Memorial Day congressional recess.  If there’s any major changes to the credit card reform in the near future, you can be sure a detailed update will appear on your friendly neighorhood money blog, Shrinkage is Good!