Last Thursday, the Federal Reserve Board approved new rules “that would better protect credit card users by prohibiting certain unfair acts or practices and improving the disclosures consumers receive in connection with credit card accounts and other revolving credit plans.” The rules are scheduled to take effect on July 1, 2010. According to the Federal Reserve’s press release, the rules will:
-Protect consumers from unexpected interest charges, including increases in the rate during the first year after account opening and increases in the rate charged on pre-existing credit card balances. (Note: I believe that this will address, among other things, the Universal Default provision in many credit card agreements.)
-Forbid banks from imposing interest charges using the “two-cycle” billing method.
-Require that consumers receive a reasonable amount of time to make their credit card payments. (Note: I am not sure how “reasonable” is defined, but the rules do say that banks may increase a rate if the minimum payment is received more than 30 days after the due date.)
-Prohibit the use of payment allocation methods that unfairly maximize interest charges. (Note: This refers to how a creditor pays down your debt. If you have debts with different rates (ie. cash advances, purchases, balance transfers), some creditors are currently applying your payments to the debt with the lowest interest rate first.)
-Address subprime credit cards by limiting the fees that reduce the amount of available credit.
The Board is also adopting final rules to revise the disclosures consumers receive in connection with credit card accounts and other revolving credit plans to ensure that information is provided in a timely manner and in a form that is readily understandable.
The Board is separately proposing rules to protect consumers that use overdraft services offered by their bank. They are also adopting final amendments to to address depository institutions’ disclosure practices related to overdraft services.
So what do you think? Will the new rules help consumers better manage their credit card debt?