Rate Increases

• The new law bans credit card companies and financial institutions from instigating rate increases on existing balances. Prior to the law, credit card companies could increase interest rates on existing balances and new purchases for any reason or "universal default."
  
  

Contract Language

• The language in credit card contracts must be clear and easy to understand, according to the law. The specifics of the contract for the first year must be "clearly spelled out" and remain in effect for the entire year. Promotional rates offered for new accounts must last for at least six months. Creditors must provide "clear disclosures" of the contract terms before an account is opened and on the periodic statements after the account is opened. The periodic statements must disclose how much the customer has paid in fees in the previous months along with the reason for the fees. Credit card companies must provide the customer with written notice of any plan to change the terms of the contact at least 45 days prior to the change.
  
  

Payment Terms

• Prior to the Act, credit card companies were able to charge late fees for late payments. The new law recognizes this tactic as "fee traps." Accordingly, the new law requires credit card companies to give its customers "at least 21 calendar days from the time of mailing" to pay the bill. Credit card companies can no longer utilize payment deadlines that end in the middle of the day, fall on weekends or that change from month to month. In addition, the law limits the amount credit card companies can charge for late payments. The credit card company must show how long it will take to pay off the balance and the interest fees charged if the consumer pays the minimum amount due each month.
  
  

Interest

• The new law requires credit card companies to apply the interest charged to the highest interest balance first. It also prevents credit cards companies from the practice of "double-cycle" billing in which institutions used the balance of the previous month to calculate interest charges for the current month.
  
  

Over-the-Limit Fees

• Before the new law, credit card companies charged large over-the-limit fees when a customer made a purchase that put their total balance over their contract limit. The new law prohibits credit card companies from automatically processing a transaction that would result in an over-the-limit fee. Instead, credit card companies must obtain the permission of the credit card holder before processing such transactions.