[CircleUp] Federal Reserve Board Ruling Implements Greater Protection for Credit Consumers

[Heidi Davis]

The Federal Reserve Board on Tuesday approved a final rule amending
Regulation Z (Truth in Lending) to protect consumers who use credit
cards from a number of costly practices. Credit card issuers must comply
with most aspects of the rule beginning on February 22. 

"This rule marks an important milestone in the Federal Reserve's efforts
to ensure that consumers who rely on credit cards are treated fairly,"
said Federal Reserve Governor Elizabeth A. Duke.  "The rule bans several
harmful practices and requires greater transparency in the disclosure of
the terms and conditions of credit card accounts." 

Among other things, the rule will: 

*	Protect consumers from unexpected increases in credit card
interest rates by generally prohibiting increases in a rate during the
first year after an account is opened and increases in a rate that
applies to an existing credit card balance. 
*	Prohibit creditors from issuing a credit card to a consumer who
is younger than the age of 21 unless the consumer has the ability to
make the required payments or obtains the signature of a parent or other
cosigner with the ability to do so. 
*	Require creditors to obtain a consumer's consent before charging
fees for transactions that exceed the credit limit. 
*	Limit the high fees associated with subprime credit cards. 
*	Ban creditors from using the "two-cycle" billing method to
impose interest charges. 
*	Prohibit creditors from allocating payments in ways that
maximize interest charges. 

In December 2008, the Federal Reserve adopted final regulations
prohibiting unfair credit card practices and improving the disclosures
consumers receive in connection with credit card accounts. This rule
amends aspects of those regulations to implement provisions of the
Credit Card Accountability Responsibility and Disclosure Act of 2009
(Credit Card Act), which was enacted in May 2009. 

The final rule represents the second stage of the Federal Reserve's
implementation of the Credit Card Act. On July 15, 2009, the Board
issued an interim rule implementing the provisions of the Credit Card
Act that went into effect on August 20, 2009. In addition to finalizing
that interim rule, this rule implements the provisions of the Credit
Card Act that go into effect on February 22, 2010. The remaining
provisions of the Credit Card Act go into effect on August 22, 2010 and
will be implemented by the Federal Reserve at a later date. 

Consumers can learn more about changes to their credit card accounts by
accessing a new online publication. "What You Need to Know: New Credit
Card Rules
<http://www.federalreserve.gov/consumerinfo/wyntk/creditcardrules.htm>
." It explains key changes consumers can expect from their credit card
companies as a result of the new rules. The Board plans to release
additional "What You Need to Know" publications in conjunction with
other major rulemakings. 

 

Vickie

Vickie K. Oldman-John, MSW

Director of Financial Education & Asset Building

Oweesta Corporation

910 Fifth Street, Suite 101

Rapid City, SD  57701

(P) (505) 896-6786

(F) (605) 342-3771

vickie at oweesta.org <mailto:stewart at oweesta.org> 

www.oweesta.org <http://www.oweesta.org> 

www.nfec.info <http://www.nfec.info> 

www.ournativecircle.org <http://www.ournativecircle.org> 

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