Meeting his Memorial Day goal, President Obama signed sweeping credit card reform into law Friday.
The bill, primarily sponsored by Senate Banking Committee Chairman Chris Dodd, D-Conn., and Rep. Carolyn Maloney, D-N.Y, was approved by the Senate on Tuesday and by the House on Wednesday.
It bans double-cycle billing and clamps down significantly on the ability of card companies to raise interest rates. The law also requires bankers to consider borrowers' ability to repay, and it adds additional protections for borrowers under 21.
Most of the card standards will go into effect in nine months, but one that will go into effect in 90 days requires issuers to give customers 45 days' notice before increasing rates, giving consumers time to close the account and pay off balances at the current rate.
The statute allows card companies to increase rates on existing balances only when a payment is 60 days or more late, a promotional rate expires, the rate is tied to a variable rate or the cardholder has entered a workout agreement.
It also requires consumers to opt in for over-the-limit fee protection, and it limits the number of over-the-limit fees issuers can charge for a single event of exceeding a credit limit.
The statute requires several disclosures designed to caution cardholders about the consequences of making only minimum payments by highlighting how long it would take to pay off balances and showing how much interest would get tacked on.
The law also requires promotional rates to be in place for at least six months, and it requires payments to apply to highest-rate balances first.
The law exceeds standards set by the Federal Reserve Board and other regulators in regulations due to go into effect in mid-2010.
