Credit Card Industry Laws

In addition to the Payment Card Industry (PCI) security standards enforced by the major credit card brands, federal regulations dictate how credit cards are allowed to be issued, processed and handled.

Under section 6050W of the IRS tax code that came with the Housing Assistance Act of 2008, payment processors are required to submit an annual 1099-K to the IRS detailing exactly how much each of their merchants earned in credit/debit sales. It’s important for the merchant to provide its processor with the correct Tax Identification Number (TIN) and tax filing name to facilitate this.

  • The Durbin Amendment, part of the 2010 Dodd-Frank law, decreased and capped debit card interchange rates. While it was meant to lower prices for customers, it ended up achieving the opposite: banks made up for the revenue loss by increasing fees (like checking account maintenance, insufficient funds and account opening fees) and eliminating rewards that formerly came with debit cards.
  • Congress passed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act in 2009, and it requires credit card companies to: clarify potentially confusing terms and conditions, give cardholders more time to pay bills, limit interest rates, cap over-limit fees, cap late fees, stop double-cycle billing, disclose information such as the consequences of making minimum monthly payments, and elongate expiration dates for gift cards.
  • The Truth in Lending Act requires credit card issuers to disclose the terms and rates for lines of credit in writing using simple language.
  • The Fair Credit Billing Act protects cardholders from having to pay for billing errors and merchandise they never received or didn’t accept (for example, if the product or service didn’t match advertising or was fraudulently purchased). The ability to initiate a chargeback if something goes wrong makes credit cards a preferred method for high-ticket purchases.
  • The Fair Credit Reporting Act ensures that information on individuals’ credit reports is accurate by giving them the right to dispute mistakes, the right to access their credit files and a time limit for negative marks like bankruptcies to stay on their reports.
  • The Fair Debt Collection Practices Act restricts how and when debt collectors can solicit payments. They are not allowed to call multiple times a day or outside certain hours, misrepresent themselves, make false threats (for example, they can’t threaten to take legal action against someone unless they are actually going to follow through on it), use profanity or discuss an individual’s debt with someone other than his or her spouse without that individual’s permission.