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Final
Credit CARD Act Rules Issued
The
next phase of amendments to Regulation Z (Truth
in Lending) was issued by the Federal
Reserve Board (FRB) on January 12, 2010. This amendment
implements the provisions of the Credit
CARD Act that are effective February 22, 2010. The amendments
pertain primarily to credit cards although there are some provisions
that refer to other types of open-end credit.
This
Rule is the second stage of three stages that will be involved in
implementing all the Credit
CARD Act rules. The first stage was in July 2009 and was an
interim rule that is being finalized as part of this Rule. The third
stage involves two remaining provisions dealing with reasonable and
proportional penalty fees and re-evaluation of rate increases. Those
provisions are effective August 22, 2010.
February
22, 2010, Provisions
These changes have been described as the most sweeping changes ever
made in rules governing credit cards. The changes are aimed at
protecting consumers and giving credit card users greater control
and clearer terms for their accounts.
The
new protections implemented by this Rule include:
·
Protecting
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 applied to
an existing credit card balance.
·
Prohibiting
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.
·
Requiring
creditors to obtain a consumer’s consent before charging fees for
transactions that exceed the credit limit.
·
Requiring
creditors to provide 45 days prior notice before interest rate
changes on future charges with the right to reject the changes.
·
Limiting
the high fees associated with subprime credit cards.
·
Banning
creditors from using the “two-cycle” billing method to impose
interest charges.
·
Requiring
that payments in excess of the minimum be allocated first to the
balance with the highest rate of interest.
·
Requiring
due dates to be the same date every month.
·
Requiring
information to be included on the monthly bill explaining how long
it will take to pay off the balance if only minimum payments are
made.
The
following provisions apply to all
open-end consumer credit:
·
Requiring
that the payment cut-off time not be earlier than 5 p.m., unless a
branch has a later closing time;
·
Crediting
a payment on the first business day if the due date is not a
business day; and
·
Prohibiting
certain marketing restrictions.
The
following provisions apply to all unsecured
open-end credit:
·
Advance
notice of change in terms (note that the proposed home equity lines
of credit (HELOC) rule which is currently outstanding imposes a
45-day advance notice); and
·
Advance
notice of rate increase due to default.
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