New protections arrive today for Americans suffering under the weight of rising credit card debt and frustrated by unforeseen fees and limits.
"Starting Monday, credit card customers will see an end to many abusive practices that have driven Americans into debt," Sen. Chris Dodd, chairman of the Senate Banking Committee, said in a statement. "Customers need to act responsibly. In turn, they deserve to be treated fairly."
Congress passed the sweeping new rules, which come after years of complaints, in May of 2009. Credit card companies will no longer be able to hit consumers with a fee for exceeding their limit unless the consumer has agreed. The companies cannot shift due dates for consumers, which can result in late payments.
Also, the companies can no longer target young consumers with aggressive solicitations. And the companies cannot ratchet up interest rates unless they give 45 days' notice. If they do raise rates, they must reduce the rates if a consumer pays on time for six months.
"With today's implementation of new rules, we are taking a critical step forward in our effort to protect American families by prohibiting the use of unfair retroactive rate hikes and late fee and over-limit fee traps by credit card companies," Treasury Secretary Tim Geithner said.
"Thanks to the leadership of President Obama, who signed the Credit Card Accountability, Responsibility and Disclosure Act into law last spring, families will finally have clear, fair rules of the road that will help them understand what they are getting into when they sign up for a card and how much they pay to use it."
Credit Card Interest Rates Rise
For some consumer advocates, the new rules come not a moment too soon, after credit card holders have seen large interest rate increases in recent months.
"After months of jacking up interest rates on money consumers already borrowed, the party is over for credit card companies," Consumers Union policy counsel Pam Banks said. "These new rules will put an end to some of the most abusive credit card lending practices that have trapped millions of Americans in debt and made it harder for them to make ends meet. Consumers still need to be on the lookout for unfair practices but this is a big step forward."
Increases in interest rates and minimum monthly payments are a number of the ways in which credit card companies may attempt to go after consumers' pocketbooks, consumer advocates say.
Chi Chi Wu of the National Consumer Law Center said, "The companies have figured out a whole different set of tactics to keep gouging consumers."
Banks said such practices may include no limits on the size of penalty interest rates, interest rate hikes on future purchases, sharp increases to minimum payments and no restrictions on the kinds of fees that companies can charge, such as those for paper statements.
To guide consumers through the new rules, the Federal Reserve Friday started a new interactive Web site -- www.federalreserve.gov/creditcard -- that summarizes the new protections.
"These online tools and resources will help consumers make well-informed decisions about their use of credit," Fed governor Elizabeth Duke said in a statement. "We will update the site regularly to provide the most useful and current information."
A recent study by the Pew Safe Credit Cards Project found that today's new rules will lead to tens of billions of dollars in savings for consumers.
'Victory for Millions of American Households'
Two abuses prohibited by the new rules -- rate increases on existing balances and penalty interest rates -- were draining more then $10 billion annually from the accounts of American cardholders.
The new rules are the second in a series of three sets that are now taking effect. The first part was implemented last summer and the third will start in August when the Fed unveils its final rules on "reasonable and proportional" penalty fees.
"We are seeing instances where Americans are being charged excessive penalties for exceeding their credit limits by even one dollar," Pew project manager Nick Bourke said. "A $39 fee for exceeding a credit limit by just a few dollars or for missing a $70 minimum payment by a few hours is difficult to justify."
Bourke called the new rules "a major victory for millions of American households, many of whom will be able to save hundreds or even thousands of dollars."
For a population already grappling with the worst recession since the end of World War II, the new rules could provide a much-needed boost.
Another boost could come from Congress in the next year if lawmakers such as Dodd succeed in passing sweeping financial regulatory overhaul measures.
A proposal championed by President Obama and passed by the House of Representatives last year would create a consumer financial protection agency to look out for consumers' rights. In the coming weeks, Dodd is expected to release his own overhaul measure, which will then move through the banking panel.
"We continue to work on strengthening consumer protections and disclosure for a wide array of financial products," Geithner said today. "As we work with Congress on broader reform to make our financial system safer and more stable, we are also working to consolidate the fragmented authority of seven separate agencies into a single, independent and accountable Consumer Financial Protection Agency."
But the financial industry has fought vigorously against the proposed agency, warning that it could curtail innovation and ultimately hurt consumers.
Bankers Support New Credit Card Rules
Still, the American Bankers Association, which represents many credit card companies, praised the new credit card rules taking effect today, even though the regulations will cost them an estimated $50 billion in the next five years.
"Consumers are really placed in the driver's seat by these new rules," Kenneth Clayton, general counsel for the group's card policy, said. "The bottom line is this: The credit card industry is changing and these new rules will help empower consumers to take control of their personal finances."
ABC News' Charles Herman contributed to this report.