Attorney General Tom Miller

Iowa Attorney General Tom Miller says new protections for credit card users that took effect today should serve as a reminder to consumers to carefully read their monthly billing statements and shop around for the best credit card terms.

The U.S. Credit Card Act place a number of limits on credit card companies boosting interest rates. Previously, the companies could raise a user’s interest rate with very little notice and apply the new rate to both future and previous transactions.

“Now, if they want to change the interest rate, they have to give you 45 days notice. So, you know it’s coming and you can consider other opportunities,” Miller said. “Probably even more significantly, the charges you made relying on the previous interest rate, you pay that previous interest rate. That is fair.”

The new law also makes it illegal for credit card companies to increase the interest rate in the first year after the card is issued. In addition, card issuers are now banned from raising the interest rate if the consumer is late on paying another bill. “What they would do is borrow a default, even a minor default, from elsewhere and use that as the excuse or basis for raising the interest rate,” Miller said. “They can’t do that anymore…an important reform.”

The law also enacts new protections for underage consumers. Miller says people under 21 will now need to prove they’re financially independent in order to open a credit card account. “It says, basically, that you have to underwrite someone under 21. In other words, they have to have the ability to payoff the credit cards from their income. Or they can get someone older to cosign, which would have the liability as well,” Miller said.

The new law also prohibits credit card companies from offering free items to students to get them to sign up for a card on or around a college campus.

More details on the U.S. Credit Card Act are posted on the Iowa Attorney General’s website.