A new law governing credit card accounts and terms — the Credit Card Accountability and Disclosure Act of 2009 — was passed by Congress and signed into law by President Obama in May 2009. Also called the Credit CARD Act, the law provides new protections to credit cardholders by limiting interest rate hikes, providing more disclosures in plain language, eliminating some unfair billing practices, and limiting the availability of cards to consumers under the age of 21.

Most of the changes are effective as of February 22, 2010, although some took effect on August 20, 2009, and a few others are slated to be in place as of August 22, 2010. Here are some highlights of the new federal credit card bill.
Limits on Interest Rate Increases

In the past, credit card issuers could increase the annual percentage rate (APR) on a credit card at any time, with minimal advance notice to consumers. The new Credit CARD Act places restrictions on APR rate hikes. (The APR is the cost of credit expressed as a yearly rate, including interest and other charges.)

Note: The new credit card law does not put a cap on the APR that banks can charge. This means that it’s still important to shop for a card with the best terms for you and to use your cards wisely. (For information about choosing a credit card, see Nolo’s article Shopping for Credit Cards, and to learn how to manage credit card debt, see Nolo’s article Avoiding Credit Card Debt.)
No APR Rate Hikes in First Year

As of February 22, 2010, card issuers are banned from increasing the APR rate on a new card for one year. There are only four exceptions to this rule:

* The bank discloses at the time the account is opened that the APR will increase sooner. (This exception addresses “teaser” rates — low introductory rates intended to entice the consumer to get a new card. The initial rate, and how long it will last, must be clearly disclosed and the teaser rate must last at least six months.)
* The card has a variable rate.
* The consumer fails to comply with a workout arrangement agreed to by the card issuer, or
* The consumer doesn’t make the required minimum payment on the card within 60 days.

No Retroactive Fee Increases After the First Year

If the card issuer raises the APR rate after a year, the new rate can only apply to new transactions.
Advance Notice of Rate Hikes or Term Changes

As of August 20, 2009, if the card issuer changes the interest rate (in accordance with the new restrictions) or account terms, it must provide the consumer with notice at least 45 days in advance. Previously, the card issuer only had to provide 15 days’ notice. The consumer may cancel the card before the changes take effect and repay the remaining balance under the old terms and interest rate.
More Time to Pay Bills

As of August 20, 2009, card issuers must mail or deliver statements at least 21 days before payment is due. This longer grace period provides consumers with more time to make payments — and a better chance to avoid additional fees and other penalties for late payment. This provision also applies to home equity lines of credit.

In addition, credit card payments must be due on the same date each month. Deadlines that fall on a weekend or holiday are due the next business day. Card issuers can no longer set early morning deadlines for the payment day –- instead they are required to post any payment received by 5 p.m. on the due date.
Restrictions on Certain Billing Practices and Fees

The Credit CARD Act limits or bans several billing practices and fees commonly used by the credit card companies.
Rules on Applying Payments to Multiple Interest Rate Cards

Some consumers have different interest rates for different balances — a low rate for a transferred balance and a higher rate on new purchases, for example. If a consumer makes a payment that is larger than the minimum amount due, the new law requires the card issuer to apply the excess portion to the balance that carries a higher interest rate.
No “Double-Cycle” Billing

Double-cycle billing (also called two-cycle billing) happens when a credit card company calculates interest charges on the current balance by factoring in the average daily balance from the previous billing cycle — even if a portion of that previous balance was paid. The new credit card law bans this practice. Card issuers may only apply interest charges to outstanding balances and not to previous balances already paid.
Limits on “Over the Credit Limit” Fees

Effective February 22, 2010, credit card companies cannot charge fees for purchases that put the account over its credit limit, unless the consumer agrees to allow the company to process over-the-limit transactions. If a consumer does not opt in, transactions that put the account over the limit would be rejected, and the consumer would avoid fees.
Better Disclosure of Terms

Effective February 22, 2010, card issuers must provide clearer disclosures of account terms and costs. The idea is to arm consumers with information so that they can make better choices as to what cards work for them and avoid costly fees and interest charges.
Disclosures on Monthly Statements

The new law requires monthly credit card statements to:

* include a box showing cardholders how much interest and fees they have paid in the current year
* show the due date for the next payment (and the fee for late payment)
* display how long it will take to pay off the existing balance (and the total cost of interest) if the consumer makes only the minimum payment due, and
* show the monthly payment required (and the total cost of interest) if the consumer were to pay off the balance within 36 months.

Internet Access to Credit Card Contracts

Credit card issuers must post their standard credit card agreement on the Internet. This will make it easier for consumers to compare and understand credit card account terms.
Protections for Young Cardholders

The new credit card law includes provisions that are meant to protect young people from racking up credit card debt.
Restrictions on Cards for Minors

Credit card companies cannot issue a credit card to anyone under the age of 21 unless: (1) the applicant has a co-signer, or (2) the young person provides proof of sufficient income to repay the credit card debt.
Marketing Restrictions

Card issuers cannot send pre-screened cards to consumers under the age of 21, unless the consumer agrees to receive the offers. Credit card companies must also stay a certain distance away from college campuses if they are offering free food or gifts to potential customers.
Beware of New Creative Credit Card Fees

The credit card industry has responded to the Credit CARD Act by coming up with ways to increase fees using tactics that aren’t covered under the new law. According to a report by the Center for Responsible Lending, some credit card companies have:

* imposed a “floor” on variable rate cards, so that increases have no limit, but decreases cannot go below a certain number
* imposed minimum finance charges (which can be higher than the actual calculated interest)
* charged inactivity fees to cardholders that don’t use their card regularly
* increased foreign transaction fees, and
* increased fees for balance transfers and cash advances.

As always, be sure to read the fine print of all new credit card offers and any change of term notices your credit card issuer sends you.

Doing background checks on potential employees, and regularly for certain positions with significant access to personally identifiable information (PII) or managemen capabilities, has been a growing trend in recent years. Such checks are viewed as ways to help prevent putting untrustworthy and significant at-risk individuals into positions where they could perform malicious and/or criminal activities.

The Fair Credit Reporting Act (FCRA) establishes background check requirements for employment that all U.S. businesses must follow. The FCRA defines a background check as a consumer report. Before a company can get a consumer report they must notify the individual and obtain written authorization; allowing potential employees the opportunity to withdraw the application if there will be information that he or she does not want disclosed.

Credit reports are used by many organizations to check on potential and current employees who are in positions with access to financial assets, such as bank tellers, systems programmers responsible for financial applications, accounts payable managers, and so on.

Washington state governor Christine Gregoire signed S.B. 5827 into law on April 18.

As an effect of this new law, employers in Washington state may no longer access the credit reports of employees or job applicants unless such information is substantially related to the individual’s current or potential job responsibilities.

While this new law is fairly short, it is significant. The requirements of S.B. 5827 as taken from the bill:

5 (1) A consumer reporting agency may furnish a consumer report only 6 under the following circumstances: 7 (a) In response to the order of a court having jurisdiction to 8 issue the order; 9 (b) In accordance with the written instructions of the consumer to 10 whom it relates; or 11 (c) To a person that the agency has reason to believe: 12 (i) Intends to use the information in connection with a credit 13 transaction involving the consumer on whom the information is to be 14 furnished and involving the extension of credit to, or review or 15 collection of an account of, the consumer; 16 (ii) Intends to use the information for employment purposes; 17 (iii) Intends to use the information in connection with the 18 underwriting of insurance involving the consumer; p. 1 ESSB 5827.PL 1 (iv) Intends to use the information in connection with a 2 determination of the consumer’s eligibility for a license or other 3 benefit granted by a governmental instrumentality required by law to 4 consider an applicant’s financial responsibility or status; or 5 (v) Otherwise has a legitimate business need for the information in 6 connection with a business transaction involving the consumer. 7 (2)(a) Subject to (c) of this subsection, a person may not procure 8 a consumer report, or cause a consumer report to be procured, for 9 employment purposes with respect to any consumer who is not an employee 10 at the time the report is procured or caused to be procured unless: 11 (i) A clear and conspicuous disclosure has been made in writing to 12 the consumer before the report is procured or caused to be procured 13 that a consumer report may be obtained for purposes of considering the 14 consumer for employment. The disclosure may be contained in a written 15 statement contained in employment application materials; or 16 (ii) The consumer authorizes the procurement of the report. 17 (b) A person may not procure a consumer report, or cause a consumer 18 report to be procured, for employment purposes with respect to any 19 employee unless the employee has received, at any time after the person 20 became an employee, written notice that consumer reports may be used 21 for employment purposes. A written statement that consumer reports may 22 be used for employment purposes that is contained in employee 23 guidelines or manuals available to employees or included in written 24 materials provided to employees constitutes written notice for purposes 25 of this subsection. This subsection does not apply with respect to a 26 consumer report of an employee who the employer has reasonable cause to 27 believe has engaged in specific activity that constitutes a violation 28 of law. 29 (c) As applied to (a) and (b) of this subsection, a person may not 30 procure a consumer report for employment purposes where any information 31 contained in the report bears on the consumer’s credit worthiness, 32 credit standing, or credit capacity, unless the information is either: 33 (i) Substantially job related and the employer’s reasons for the 34 use of such information are disclosed to the consumer in writing; or 35 (ii) Required by law. 36 (d) In using a consumer report for employment purposes, before 37 taking any adverse action based in whole or part on the report, a 38 person shall provide to the consumer to whom the report relates: (i) ESSB 5827.PL p. 2 1 The name, address, and telephone number of the consumer reporting 2 agency providing the report; (ii) a description of the consumer’s 3 rights under this chapter pertaining to consumer reports obtained for 4 employment purposes; and (iii) a reasonable opportunity to respond to 5 any information in the report that is disputed by the consumer. This 6 subsection applies to job applicants and current employees.

It is worth noting that the new law does not apply to an employer review of the credit report of an employee “who the employer has reasonable cause to believe has engaged in specific activity that constitutes a violation of law.”

Four other states (Hawaii, Pennsylvania, New York and Wisconsin) have similar restrictions on employers using credit reports.

While it is obvious the new law applies to employers based in Washington and employees and job applicants who are residents of Washington, it could also apply to a Washington employer with out-of-state job applicants or employees, an out-of-state employer with employees and applicants that live in Washington, and possibly even a business that interviews job applicants who would need to relocate to Washington to perform the job.

Talk with your legal counsel about the impacts of this law on your business. Consider doing the following, which are good to do on a periodic basis anyway:

* Identify and clearly document categories of employees and specific employees for whom credit information is related to their job responsibilities to justify why credit checks are necessary.

* Review your employment forms to ensure that they are not worded in such a way that an employee or job applicant is giving permission for a credit report review that is now prohibited by this and similar laws.