The Federal Reserve today provided proposed new credit card rules to "protect consumers who use credit cards from a number of potentially costly practices." This is the second of three new sets of rules that will amend Regulation Z (Truth in Lending) for credit cards. Here are the proposed changes in the regulations which incorporates the provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act), which was enacted in May 2009:
- 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 under 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.
There is a 30 day public comment period once these rules appear in the Federal Register, which is expected shortly. This proposed rule would go into effect on February 22, 2010. According to the Wall Street Journal, Congress is looking to move up the implementation date to December to "stop credit-card issuers from raising rates and ban other controversial practices before the legislation goes into effect."