Federal Reserve Approves Final Rules to Protect Credit Card Users From a Number of Costly Practices
The Federal Reserve Board has approved a final rule amending Regulation Z (Truth in Lending) 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.
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.
Consumers can learn more about changes to their credit card accounts by accessing a new online publication. "What You Need to Know: New Credit Card Rules." It explains key changes consumers can expect from their credit card companies as a result of the new rules. The Board plans to release additional "What You Need to Know" publications in conjunction with other major rulemakings.
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