The Credit CARD Act of 2009Buying & Selling Under the Credit CARD Act: 10 Best Practices for Consumers & Merchants
In a Nutshell
Do you know which law governs your credit card interest rates? Or, which agency you can turn to when your rights are abused? In this article, we’ll discuss the Credit CARD Act of 2009 and how it works. We’ll examine what it does to protect consumers, as well as areas in which the law’s protections fall short.
Here’s What Protections Are — & Aren’t — Offered Under the Credit CARD Act of 2009
The Credit CARD Act of 2009 is one of the most important consumer finance laws you’ve probably never heard of.
It provided a bevy of new consumer protections in the wake of the 2008 financial crisis. Perhaps most importantly, though, the Credit Card Act sets the rules governing credit card fees and interest rates. This prevents card issuers from jacking up interest rates without notice.
But are these protections broad enough? And what about merchants — does the law cover them equally? Let’s find out.
Chargeback Laws
This guide provides an overview of the legal framework surrounding chargebacks. It covers the rules and regulations that govern how chargebacks are processed and handled, including the rights of consumers and merchants. The article discusses cardholder chargeback rights, the regulations that guarantee them, and other industry guidelines and protections.
What is the Credit CARD Act of 2009?
- Credit CARD Act
The Credit Card Accountability Responsibility and Disclosure Act of 2009, more commonly known as The Credit CARD Act, was a consumer protection mechanism implemented in the wake of the 2008 financial crisis. The purpose of the CARD Act is to protect consumers against unreasonable interest rates and ensure cardholders are billed fairly.
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Congress passed the Credit CARD Act of 2009 at the height of the Great Recession. The law expands on existing legislation like the Truth in Lending Act (TILA) of 1968 by improving the transparency of credit card terms and conditions. It also sets firm limits on specific fees and interest charges that banks can levy against cardholders.
In a broad sense, the law:
- Prevents murky billing language and potentially damaging business practices.
- Dictates when and how creditors can hike up interest rates and fees on credit cards.
- Ensures that consumer disclosures are clear, making it less of a headache to understand credit card terms and conditions.
- Manages how credit card companies can deal with children and young adults, protecting them from predatory lending practices.
How the Credit CARD Act of 2009 Protect Consumers?
In simple terms, the Credit CARD Act stipulates that credit card issuers must wait for an account to mature by at least one year before they can raise interest rates. A creditor must inform the cardholder at least 45 days before the increase, allowing the cardholder time to cancel before any rate spike. It also ensures cardholders can’t be charged interest on balances outside of their most recent billing period, as had previously been the practice of many issuing banks.
Here’s an outline of the key protections granted to cardholders under the Credit CARD Act of 2009:
The CARD Act created the Consumer Financial Protection Bureau, which now enforces consumer financial protection laws including the FCBA and EFTA. The CFPB handles consumer complaints about billing disputes, issues regulatory guidance on error resolution, takes enforcement actions against issuers who don’t follow dispute procedures, and publishes official interpretations of Regulation E and Regulation Z.
While the CFPB doesn't advocate for merchants, understanding its guidance helps merchants anticipate how issuers will approach disputes.
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What the CARD Act Left Unchanged
The CARD Act did not modify FCBA dispute rights — consumers still have 60 days to dispute billing errors, and the $50 liability cap for unauthorized charges remains intact. It didn't change chargeback reason codes, merchant liability rules, friendly fraud definitions, card network dispute processes, or representment procedures. The law also didn’t cap maximum interest rates, address deferred interest promotions (where retroactive interest applies if balances aren't paid by a deadline), or extend protections to business credit cards.
For merchants dealing with chargebacks, the CARD Act changed nothing about dispute resolution. Merchants weren't mentioned as stakeholders, meaning your rights and processes remained exactly as they were under the FCBA.
More significantly, the CARD Act represents a missed opportunity. The 2008 financial crisis prompted the most significant credit card legislation in decades. Congress reformed rate hikes, fee structures, and disclosure practices. But the issues that merchants had already been raising for years at that point, like card-not-present fraud liability and chargeback abuse, went unaddressed.
Merchants didn’t get friendly fraud penalties or definitions, clearer liability rules for CNP transactions, chargeback abuse deterrents, access to customer contact information during disputes, or representment process reforms. The message was clear: consumer protection remained the legislative priority.
It’s also worth noting that, if you use a business credit card for company expenses, CARD Act protections don’t apply. Business accounts are explicitly excluded, meaning issuers can raise rates without notice, apply double-cycle billing, and charge over-limit fees on business cards. Merchants don’t benefit from the law even as cardholders.
Under the Credit CARD Act, gift cards must be valid for at least five years from purchase or last load. Inactivity fees cannot be charged until a card has been inactive for at least 12 months, and if service fees are permitted, only one fee per month is allowed. All fees must be clearly disclosed on the card or packaging.
Merchants Require More Protections, Too
The Credit CARD Act of 2009 was primarily designed to provide protections to consumers rather than merchants. That said, it does affect the overall credit card ecosystem.
Although merchants do not need to directly comply with the Credit CARD Act, they do need to maintain compliance with credit card processing rules and regulations.
Take transparent pricing, for instance. Merchants should be clear about all costs associated with products or services. Hidden fees can lead to chargebacks and can damage the business's reputation. They must also ensure secure transactions by investing in security measures such as encryption and tokenization to protect customer data. This protects customers, and also builds trust, which can lead to increased sales.
While the Credit CARD Act doesn't directly provide protections for merchants, it contributes to an overall environment of trust and transparency in the financial world, which can benefit both consumers and merchants alike. It's crucial for merchants to follow ethical practices in all aspects of their business. This should be not only to comply with laws and regulations, but also to build trust with customers and grow their business.
Of course, while consumer protection is good, it can open the door for other issues. Consider chargebacks, for instance.
Regulations like the Credit CARD Act, the Truth in Lending Act, and others have helped set the stage for problems like chargeback abuse. If your business is having issues with chargebacks, contact Chargebacks911® today. Learn how you can recover revenue with the benefit of a 100% ROI guarantee.
