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In May 2009, the Credit
Card Accountability Responsibility and Disclosure Act of
2009 (Credit Card Act) amended the Truth
in Lending Act (Regulation Z) and
other
statutes, which provide rules that are intended
to better protect credit card users by prohibiting
certain unfair acts or practices. These statutes also aim
to improve the disclosures consumers receive in
connection with credit card accounts and other revolving
credit plans.
The Federal
Reserve Board approved an interim final rule in
January 2010 amending Regulation Z 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. You may wish
to view the January
2010 press release on the regulation changes.
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.
This 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. You may
wish to view the September
2009 press release on the regulation changes.
The remaining provisions of
the Credit Card Act's amendments to Regulation Z go
into effect on August 22, 2010, and will be implemented by
the Federal Reserve Board at a later date.
The Summer 2009 issue of the Federal
Deposit Insurance Corporation's (FDIC) consumer
news offers information about the new credit card
regulations. Please visit the New
Consumer Protections for Credit Cards and Mortgages: What
the New Rules Mean for You web page.
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