Protecting Consumers—A Glance at Obama’s Credit Card Act and Its Effectiveness

by Legal Author on June 13, 2012

Below is a legal blog post regarding Obama’s Credit Card Act in the US and its effectiveness.

In 2009, now three years ago, President Obama signed into effect the Credit Card Act. The Act was designed to protect debt-swallowed consumers from surprise charges and fees put in fine print by credit card companies. While the Act was opposed by many financial institutions throughout the country, Congress cleared the bill with widespread support. With an economy turned for the worst, trillions of dollars in debt, this Act brought national attention to the widespread problem of consumer debt. While the act was not designed to relieve consumers of blame for irresponsible spending, it does shine some much needed spot light on the credit card companies themselves. The Credit Card Act seeks to extinguish confusing fine print, sudden unexplained fees on credit card bills, unannounced shifts in payment deadlines and interest charges, and sudden rate increases.

As a result of the signed bill, credit card companies are prohibited from giving cards to people under 21 without proof that they would be able to pay back debt or without a parent or guardian co-sign. Customers must be 60 days behind on a payment before seeing a rate increase on their existing balance. If a balance does increase, the lender must restore the lower rate after the cardholder pays the minimum balance on time for six consecutive months. Also, consumers now receive 45 days’ notice of a rate increase and a written explanation of the process. While these changes seem like positive measures for American consumers on paper, what effect have they had?

Today, in 2012, these new Credit Card laws have been in full effect for two years. Our failing and flailing economy continues to be of hot debate and discussion in the US. Yes, as a country we are still trillions of dollars in debt. Yes, many American households are still struggling to makes ends meet without borrowing from credit lenders. Yes, student debt is at an all-time high for college graduates, entering the workforce. But, have the provisions put in place by the 2009 credit card act achieved their goals? Studies suggest that they have.

Looking at a sample of 997 low and middle income American households carrying credit card debt, researchers have found improvements with many aspects of consumer held debt over the past two years. While there are several areas of improvement researchers have found, Business Insider suggests that there are two central factors, driving down consumer debt. The first is that households are clearing their debt faster than they were prior to the 2009 credit card laws. Credit card companies explicitly state how long it will take to pay off a current balance by only making the minimum monthly payment. It appears having a clearer understanding of payment durations helps consumers pay back debt in a timelier manner. The next major factor involves limits on late fees and penalties. Because credit card companies must now provide 21 days between the time a bill is mailed and the time they charge a fee, households are better able to avoid them. Without extra fees and penalties, the debt-swallowed can better surface.

While these credit card provisions have helped consumers better understand their credit use and resolved some standing issues with debt repayment, there remain many obstacles. Consumers need to remain diligent in educating themselves on credit card policies and long term debt.

Eliza Morgan is a full time freelance writer and blogger. She specializes in writing about business credit cards and other business related topics. If you have any questions email her at

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