FINAL CREDIT CARD ACT RULE

The Federal Reserve Board has adopted amendments to Truth in Lending designed to protect consumers from perceived or actual abuse from credit card issuers. Certain parts of the new law took affect August 20, 2009 with additional amendments effective February 22, 2010, although compliance with some provisions is not effective until July 1, 2010.

Interest Rate Increase

The rule limits circumstances under which a lender can apply increased interest rates or fees to existing consumers with balances. Interest rates generally, cannot be increased in the first year the account is open. If 45 days notice is given, an increase in interest rates may be made to new credit card transactions.

Ability to Pay

Credit card issuers cannot open a new account or increase the credit limit of an existing account without first considering the consumer’s ability to make the monthly minimum payments on the maximum balance plus related interest and fees.

Younger Consumers and Students

Credit cards cannot be issued to a consumer under age 21 unless the person’s application either indicates the ability to make the required payments, or is cosigned by someone 21 years or older who has the ability to make the payments. Special limits also apply to marketing credit cards to college students.

Over-Limit Fees

Credit card issuers must obtain the express consent before they impose any fee for a transaction that exceeds the consumer’s credit limit. The rule also prohibits a lender from the following:

Imposing more than one over-limit fee per billing cycle; and
- Prohibits imposing a fee for the same over-limit transaction in more than three billing cycles; and
- Charging over-limit fees when the card issuer fails to fund the consumer’s available credit; and
- Conditioning the amount of credit available on the consumer’s agreement to pay the over-limit charges; and
- Applying charges if the credit limit is exceeded because of the card issuer’s assessment of fees or charges.

Payment Allocation

Credit card issuers must allocate consumer payments greater than the required monthly minimum when the consumer has multiple card balances, to the account balance with the highest interest rate.

Disclosure of Agreements

Credit card issuers must post their standard agreements on their websites and give the agreements to the Fed to post on its website.

Fees

Credit card issuers may not charge fees (other than those for late payments, returned payments and those exceeding the credit limit) that total more than 25 percent of the initial credit limit during the first year an account is open.

Double Cycle Billing

Credit card issuers may not impose finance charges on balances for days in previous billing cycles because of the loss of the card’s grace period. If a consumer pays some but not all of the card balance prior to the expiration of the grace period, the issuer may not impose finance charges on the portion of the balance that has been repaid.

Payment Fees

Credit card issuers may not charge fees for making a payment, except when the payment involves expedited service by a customer service representative.

Payoff Disclosures

Each periodic statement must show the amount of time and total cost that will result from paying the account balance in full by making only monthly minimum payments and the monthly payment amount and total cost required to pay the balance off in a 36-month period.