Disappointed in the CARD Act? You Should Be

08.25.09
By John Ulzheimer

On August 20, 2009 two protections went into place thanks to the CARD Act. Several more protections will go into place in February 2010. The CARD Act was designed to protect consumers from credit card companies. And while many of the provisions help consumers, the act fails miserably to address some of their key complaints.

So what hasn’t changed? Read on...

Arbitrary Credit Limit Decreases Are Still Perfectly Legal – According to a study published last week by FICO, roughly 24 million consumers saw a decrease in their credit limits during the study period dating from October 2008 through April 2009. This is slightly more than the results of a similar study performed by FICO covering April 2008 through October 2008 where the amount was roughly 22 million cardholders. Arbitrary means that the consumers didn’t prompt the lender’s actions by doing something adverse with their credit such as miss payments. If the two populations are mutually exclusive (i.e. there’s no overlap in study populations), that means that roughly 46 million consumers saw their credit limits reduced during the one-year period dating from April 2008 to April 2009. Just to give you an idea of just how large that group is, it represents 23 percent of the entire population of consumers who have credit reports.

The new provisions of the CARD Act do nothing, absolutely nothing, to prevent credit card issuers from continuing to do the same things. In fact, they don’t even have to notify you of the credit limit decrease AT ALL – unless they used credit data to make their decisions, and even then they don’t have to notify you until after the fact.  

Arbitrary Account Closures Are Still Perfectly Legal – Another widespread practice by credit card issuers is to close down accounts that are either inactive or underperforming. Today card issuers are allowed to continue this practice, and nothing in the CARD Act prevents it. In fact, just like credit limit decreases, the issuer is not required to give you notice ever, unless the decision was made when reviewing a credit report. And in that case the notice doesn’t come until after the closure. Many consumers find out that their account was closed when they are declined at the register.

So, you tell me: Does the new CARD Act make you feel more protected from credit card issuers?  

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The CARD Act fails to address key consumer complaints.