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Credit CARD Act of 2009 Enforcement

Capital One quadrupled the interest rate because I missed a payment due date by a day or so. Is that legal?

My business Capital One credit card recently raised my APR from %5.86 to over %23. They stated the reason for the rate hike was because I missed the payment due date twice. I did miss the due dates but only by a day or so and I paid 5 times the minimum amount. I understand there are some new laws the CC companies have to abide by now. My due date is not the same each month? I understood this was a requirement as of August. Aren't they required to give a 45 day notice before raising the rate? I don't have any record of them notifying me. The CC company told me, I would have to make 12 on time monthly payments before they would lower my rate again. I thought it was 6 months? Can you tell me what the governing body is that regulates these CC companies and if you believe I should file a complaint based on my statements above.

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Bill's Answer
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The Credit Card Accountability Responsibility and Disclosure Act of 2009 is an amendment to the Truth in Lending Act. Enforcement of the provisions of the Truth in Lending Act are divvied-out to the Federal Deposit Insurance Corporation, Federal Reserve, Federal Trade Commission, Bureau of Federal Credit Unions, Secretary of Transportation, Secretary of Agriculture, and the Farm Credit Administration. Based on a quick read of the Truth in Lending Act (it totals 9,500 words) and the Credit CARD Act of 2009 (14,500 words) it appears that the Federal Trade Commission is responsible for administrative enforcement of the bulk of the Truth in Lending Act.

The Truth in Lending Act creates criminal liability for violation of its provisions, and creates a cause of action for civil action (see § 130. Civil liability).

However, you should know that the Credit CARD Act of 2009 is not fully implemented as I write these words in early December 2009. As of August 20, 2009, card issuers must provide at least 45 days to notify the account holder of any changes in terms to their cardholder agreement, and send statements at least 21 days prior to the due date. Banks and other financial institutions will need to comply with the Act fully on February 22, 2010.

Let us explore whether Capitol One's behavior violates the Credit CARD Act of 2009. It is not clear to me that Capitol One's actions violate the Truth in Lending Act as it can be enforced today.

You pointed out the 45-day rule and six-month rule. This 45-day rule prohibits the bank from making "an increase due solely to the fact that a minimum payment by the obligor has not been received by the creditor within 60 days after the due date for such payment, provided that the creditor shall--

(A) include, together with the notice of such increase required under section 127(i), a clear and conspicuous written statement of the reason for the increase and that the increase will terminate not later than 6 months after the date on which it is imposed, if the creditor receives the required minimum payments on time from the obligor during that period; and

(B) terminate such increase not later than 6 months after the date on which it is imposed, if the creditor receives the required minimum payments on time during that period."

A huge loophole Congress wrote into the 45-day rule is the phrase "solely to the fact." This seems innocuous on first reading, but if you think diabolically you realize this allows the banks to use other factors as an excuse to boost your rate, which the bank does not need to disclose. The excuse could be a blip on your credit report, a change in your address, or even the pattern of use of the account it deems as risky.

The Credit CARD Act of 2009 act is not fully implemented -- the delay was put in place to give the banks time to upgrade their software. I do not see that you have a cause of action or the basis of a complaint under the Credit CARD Act of 2009 because you missed two payments, and because the law is not fully implemented.

I hope this information helps you Find. Learn & Save.



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