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Agencies
propose Rule on Unfair and Deceptive Practices (cont'd)
Proposal
Under
this proposal, the FRB’s Regulation AA will be amended as will the
OTS’ and NCUA’s unfair and deceptive acts or practices rules.
Credit Cards
The proposed rule would prohibit the
following seven practices associated with credit card programs:
·
Unfair time
constraints for consumers to make payments – a payment could
not be considered late unless the borrower is given a reasonable
period of time to make the payment. The proposal recommends credit
card statements be mailed at least 21 days before the payment due
date.
·
Unfair
allocation of payments among balances with different interest rates –
when a credit card balance is attributed to items with different
interest rates, institutions would be required to reasonably
allocate payments in excess of the required minimum payment among
each item in a manner no less beneficial to the member than one of
three criteria.
·
Unfair
application of increased APRs to outstanding balances – the
proposal would prohibit applying an increased interest rate
retroactively to pre-existing balances, except for cases involving a
variable rate, the expiration of a promotion rate, or where the
consumer is more than 30 days late with the minimum payment.
·
Unfair fees for
exceeding the credit limit solely based on a hold placed on an
account – no over-the-limit fee could be assessed when the
consumer exceeded the credit limit solely because a hold is placed
on the account.
·
Unfair balance
computation method – institutions cannot compute the finance
charge using a “two-cycle” average daily balance computation.
(Two- or double- cycle billing occurs when the creditor reaches back
to earlier billing cycles when calculating the amount of interest
charged in the current cycle.)
·
Unfair
financing of security deposits and fees for insurance or
availability of credit -- no
security deposit or other fee associated with opening an account
could be financed if the charges constitute more than 50 percent of
the available credit offered to the consumer. If the security fee
exceeds 25 percent of the available credit, the charge would have to
be spread over the first year of the account instead of charging a
lump sum.
·
Deceptive firm
offers of credit – the proposal would require a firm offer of
credit with a range of rates and terms to include a description of
the factors used to determine whether the consumer will qualify for
the best rates and terms.
Overdraft Services
Additionally, the proposed rule would address
overdraft protection services on deposit accounts, focusing on a
consumer’s ability to opt out of overdraft services; and unfair
fees for debit holds. Specifically, the following would apply:
·
Opt out --
institutions would not be allowed to impose a charge for payment of
an overdraft, unless the consumer has been provided an opportunity
to opt out of the
overdraft protection program and the consumer elects not to opt out.
A partial opt out must be offered so consumers can opt out of only
overdrafts caused by ATM withdrawals and point-of-sale transactions.
·
Overdrafts
created by a debit card -- overdraft charges could not be
imposed if the overdraft is caused solely by a hold placed on funds
that exceed the actual purchase amount of the transaction, unless
the actual purchase amount would have caused the overdraft.
Details
The proposal may be viewed at http://edocket.access.gpo.gov/2008/pdf/E8-10247.pdf.
Comments are due by
August 4, 2008
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