In January 2010, the Federal Reserve announced new rules regulating credit cards that went into effect February 22, 2010. Credit card issuers will incur costs to modify existing billing and information systems to comply with the new card reform requirements likely resulting in reduced revenue. The new rules include the following provisions:
• Credit card companies must give 45 days' notice prior to any increase in or change to (a) a cardholder's interest rate, (b) certain fees associated with a credit card, or (c) a card's basic terms;
• Interest rates may not increase for the first year after a cardholder opens an account;
• Card issuers will not be allowed to establish minimum interest rates;
• Credit card fees may not exceed 25% of a cardholder's credit limit; but, this does not apply to penalty fees;
• Credit card companies may not automatically enroll cardholders in programs that charge regular fees for exceeding the credit limit;
• Monthly statements must indicate how long it will take a cardholder to pay off the balance while making only minimum payments;
• A card issuer must deliver a credit card bill to a cardholder at least 21 days prior to payment being due;
• Credit card issuers may only charge interest on balances in a cardholder's current billing cycle.
The rules seek to reform credit card issuers from opening card accounts or increasing credit limits for consumers without considering the ability of the consumer to make the required minimum payments under the account. A credit card issuer will need to have policies on reviewing information about a consumer's income, assets or current obligations, or to issue a credit card to a consumer who does not have any income or assets.
Cardholders will benefit from increased account disclosure requirements and the restriction or prohibition of historical credit card practices that cardholders. Credit card issuers may require higher interest rates or assess new or additional fees in connection with credit card accounts, and engage in greater up-front risk profiling of applicants to reduce credit availability to risky cardholders.
In a tough economy, engage a bankruptcy law firm that stays up to date on changes in laws affecting consumers.
