Blogging for Change

New rules to protect credit card users

by Kim McGrigg on
12/23/2008
in Consumer Protection

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?

Kim McGrigg is the former Manager of Community and Media Relations for MMI.

Recommended Articles

Man sitting in front of pile of bills, trying to understand his options.
Professional Budget Advice
Make the most of every dollar and start building toward your dreams! Budget counseling is FREE and available 24/7.
Learn More
Learn more
  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Financial Counseling Association of America Financial Counseling Association of America
    MMI is a proud member of the Financial Counseling Association of America (FCAA), a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.