Look for the "Schumer Box"

Credit card companies have to provide certain information in any offer that they make to you, under the federal Truth in Lending Act (TILA).

You can find this information printed in what’s known as the “Schumer box” (after the U.S. Senator from New York who drafted the bill), which is required under TILA.

This box will appear on the back of the letter offering you credit, or on another sheet of paper enclosed in the same envelope.

The credit card issuer must tell you:

• the APR or APRs;
• finance charges, including the minimum finance charge;
• the minimum payment required;
• the method used for computing your outstanding balance;
• the actual company offering you credit (sometimes not the company marketing the card);
• the credit limit;
• the grace period;
• the annual fee, if any; and
• the fees for credit insurance, if any.

In disclosing the APRs, the card issuer must make it clear whether there is an introductory or promotional rate and, if so, how long it will last.

Plus, it must disclose the regular APR for purchases, cash advances and balance transfers—as well as any penalty rate and what actions on your part will trigger the penalty rate.

If the interest rate is variable, the disclosure box also must include information on how the rate is computed.

A class-action lawsuit in which consumers were fooled by the information provided in a solicitation letter illustrates the importance of reading the Schumer box—and the cardholder agreement that you receive when you get your credit card.

In the case, against New England-based Fleet Bank, the bank’s letter promised that the 7.99 percent rate “is NOT an introductory rate. It won’t go up in just a few short months.” However, 13 months later, Fleet raised the interest rate.

The court found this was a completely legal move on the credit card issuer’s part, because the Schumer box said the rate could change if the cardholder failed to meet repayment requirements or upon closure of the account. Plus, the cardholder agreement said the bank reserved the right to change the terms of the agreement at any time.

U.S. District Judge John Fullam wrote:

The preliminary disclosure statement sent to [the cardholder] at the same time as the solicitation letter informed her that [Fleet] reserved the right to change the interest rate, upon due notice. The credit card agreement, which [the cardholder] signed (after her application had been approved) also contained an express provision giving [Fleet] the right to change the interest rate.

Therefore, Fleet did not violate the disclosure requirements of the Truth in Lending Act or other parts of that law. In other words, read the agreement.

The TILA also applies after you’ve started using your credit card. For instance, lenders are required by the law to give you at least 15 days’ notice before raising the APR on a fixed-rate credit card.

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