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May 25, 2009

President Obama Signs Credit Card Act of 2009
    by Robert Kropp

Act is intended to eliminate unfair rate increases and increase accountability for creditors and regulators. -- On May 22, President Obama signed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, a bill that seeks to address many of the issues raised by corporate shareowners in resolutions scheduled for proxy votes this spring.

The shareowner proposals, submitted by members of the Interfaith Center on Corporate Responsibility (ICCR), were described in a story posted by last month. The proposals "request that Boards of Directors complete reports to shareowners that evaluate practices commonly deemed to be predatory, the credit card marketing, lending, and collection practices of the companies, and the impacts these practices have on borrowers."

The bill signed into law by the President includes four Principles for Long-term Credit Card Reform. Consumers must have reliable protection from credit card abuses, and must be able to shop for credit cards without being taken advantage of. Credit card companies must use plain language to realize their responsibility for transparency in all communications with consumers, and their accountability must be expanded to ensure that they can be held responsible for deceptive practices.

The key elements of the CARD Act include the banning of unfair rate increases, which include retroactive rate increases and unfair fee traps in such forms as weekend deadlines, for example. Creditors must give consumers clear disclosures of account terms before the opening of an account, and clear statements of account activity afterwards. Accountability will be increased both for creditors, who must make contracts available on the Internet in a usable format, and for regulators, who will be required to request public input on trends and potential consumer protection issues. Regulators will be required to report annually to Congress as well.

The act also contains new protections for college students and young adults.

Upon signing the bill President Obama said, "With this new law, consumers will have the strong and reliable protections they deserve."

Many of the predatory tactics addressed by shareowner resolutions by ICCR members seem to have been targeted by the CARD Act. These include universal default policies, bait-and-switch marketing tactics, hidden fees, and intentionally complicated cardholder agreements.

Whether the bill would mitigate the impact of creditor policies on consumers by helping them manage and reduce their debt, and whether new standards of underwriting would be required, are less clear.

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