Credit CARD Act Rules
The Federal Reserve issued a 1,155-page set of final rules governing the Credit CARD Act rules and how credit card companies must implement new federal banking requirements. Major provisions of the Credit CARD Act of 2009 were slated to begin Feb. 22. That was the deadline for anyone who issues consumer credit cards to comply with restrictions on when credit card interest rates can be increased. The rules issued detailed how the Feb.22 changes will be implemented.
The new rules include that interest hikes are not allowed during the first year a new credit card is issued except under limited circumstances. Rate hikes cannot apply retroactively to existing credit card balances. Hiking interest rates on future transactions, however, is still allowed as long as the credit card issuers give at least 45 days’ advance notice of the change and allow customers to opt out of the rate hike. 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 new credit card law will limit are fees such as those charged when consumers exceed their credit limits, pay bills online or by phone. The new credit card law will restrict the issuing and marketing credit cards to young adults and on college campuses. Starting Feb 22, anyone under the age of 21 must get an adult to co-sign on the account if they want to open their own credit card accounts or show proof that they have independent means to pay for the card debt themselves. The new law will ban the practice called “double-cycling billing” in which card issuers charge interest over two billing cycles rather than one. It will also prevent credit card issuers from allocating monthly payments in ways that maximize interest charges to consumers. The new law will limit upfront fees charged on subprime credit cards issued to people with bad credit. It will also ban shifting due dates so that payments will be due on the same day every month.
We might still see some sweeping changes with bank rates but the Credit CARD Act rules herald a new era for America’s credit card customers.
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