A revolution is coming today, and anyone who uses a credit card should know about it.

The Credit Card Act of 2009 takes effect today. It will affect the ways Americans qualify for, obtain and use their credit cards.

Its primary goal is consumer protection.

Scott Irwin collects his credit card receipt from Kristen Schlemmer after paying at George’s restaurant in Waco.
Jerry Larson/Waco Tribune-Herald

“These new regulations represent the most sweeping reforms to the credit card industry in nearly 30 years,” said Mike Sullivan, director of education for Take Charge America, a national debt-counseling agency.

But the credit card companies are not taking this act lying down. Some boosted interest rates, closed accounts and converted fixed-rate accounts to adjustable-rate accounts before the law became effective.

“Short-term, this may be painful because the credit card companies don’t want to walk away from money,” Sullivan said. “They make a lot on late fees and other things that are going to be more difficult to collect.”

Sullivan carries cards with interest rates that “jumped into the 20-percent range because they knew this was coming,” he said.

Jim Roberts, a Baylor University marketing professor who studies spending habits, said there is much to like about the act.

More than anything, he said, it eliminates surprises.

“This helps level the playing field for credit card customers who were at a disadvantage in their dealings with credit card companies,” Roberts said.

For example, card issuers must notify consumers of significant changes to their account terms at least 45 days before those changes. That’s an increase of 30 days, Roberts said.

If the consumer doesn’t agree to the changes, he or she can close the account or “opt out.”

Other aspects of the act deal with interest rates, billing, qualifications and fees.

Consumers’ next credit card statements also will contain an ugly truth — how much that card really costs to use.

For example, under the new law, a statement will explain that paying the minimum on a $3,000 balance with a 14 percent interest rate could take 10 years to pay off.

The reforms only apply to consumer credit cards, not commercial credit cards issued to small-business owners or corporate accounts.

“Whether you are a Democrat or a Republican,” Roberts said, “you have to give kudos to the Obama administration for what it is attempting to do with this legislation.”

The law that President Barack Obama signed last May shields users from tactics that card companies have used to drive up profits.

Consumers will save at least $10 billion a year from curbs on interest-rate increases alone, according to the Pew Charitable Trust, which tracks credit card issues.

But a catch existed. Card companies had nine months to prepare while the Federal Reserve clarified certain rules.

Many issuers used that time to raise interest rates or add annual fees to their cards.

The new law didn’t stopped credit card companies from going after fresh customers.

A total of 398.5 million solicitations were mailed in the fourth quarter of 2009, a 46 percent jump from the third quarter and the first quarterly increase since 2007, according to data from Synovate, a market research firm.

“I have definitely seen a lot of solicitations coming through lately, and I just toss them in the trash,” said Bobby Horner, a plans examiner for the city of Waco who uses his cards sparingly.

He plans to take a close look at his latest statements to see if his interest rates went up before the new law.

In fact, several people shopping at area stores said they rarely examine their monthly statements, but they plan to discover whether they’ve been hit with rate hikes.

Roberts likes the new law and the protection it provides, but he said government can’t legislate self-control.

“You still have to look inside yourself and say, ‘I can’t afford this,’ ” he said.

The Baylor professor said he also likes the provision relating to gift cards.

It says that unless stated explicitly, such cards can’t expire before five years.

Issuers of the cards, he said, also will face limits on dormancy fees — those imposed on customers who don’t use their cards within a given time.

Americans are getting credit card relief just as their credit card debt is dropping.

Last November, Equifax reported that such debt declined 7.3 percent from a year ago.

Revolving credit, the majority of which is card debt, has fallen more than $100 billion since October 2008, from $976 billion to $874 billion.

Some experts say consumers became fed up with interest rate increases and credit limit decreases.

“Issuers began making these changes in 2008, and we expect them to continue in 2010. Even though the card act will help stabilize some rate increases, many cardholders are already stuck with very high rates,” said Bill Hardekopf at LowCards.com. “The only way to protect yourself against these high rates is to pay off your balance.”

The Associated Press contributed to this report.

mcopeland@wacotrib.com

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