Consumers to Benefit from Fed?s Sweeping New Credit Card Rules

WASHINGTON – The Federal Reserve today released sweeping new rules to empower consumers as part of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009.

“These rules – the most comprehensive ever seen – herald a new era for America’s credit card customers,” said Kenneth J. Clayton, Senior Vice President and General Counsel for ABA Card Policy  “Many practices that frustrated customers have been eliminated, and credit card users will now benefit from greater control and clearer terms for their accounts.”

This is the most important step in an ongoing process that will increase protections and make card terms more predictable and manageable for customers. Consumers will benefit from important new protections in four areas:

The new law ends confusing billing practices, instituting new rules that are easier to understand.

Customers get even greater protections from interest rate increases.

• As part of this process, customers are already able to reject interest rate increases;
• Now, nearly all interest rate increases on outstanding balances will be prohibited (with very limited exceptions);
• There will be no interest rate increases for the first year any account is open; and,
• Interest rate changes on future charges will not happen without prior notice of 45 days. Consumers will still have the right to reject them.

The new law restricts most fees.

• There will be no over the limit fees unless the customer actively “opts-in” to this service;
• Credit card companies will not impose fees for the manner in which customers pay their bills (for example, by phone); 
• Upfront subprime card fees are severely limited;

Young people who use credit cards will be protected by additional rules.

• Customers under 21 years old will be required to show they have the means to pay off their debt or have a cosigner; and
• The new law restricts the marketing of credit cards on college campuses. 

These new CARD Act provisions build upon the protections that took effect in August 2009 and establish a firm foundation that will allow consumers to better understand and use their credit cards. Later this year, in July and then again in August, that foundation will be strengthened further when the rules to improve customer disclosures and provide other consumer protections are implemented.

“This February’s improvements mark the most important step in the comprehensive reform of the credit card industry,” said Clayton.  “They put consumers squarely in the driver’s seat by restricting fees and requiring clearer rules and improved disclosures. The bottom line is this: the credit card industry is changing and these new rules will help empower consumers to take control of their personal finances.”  

The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation’s banking industry and strengthen America’s economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry’s $13.3 trillion in assets and employ over 2 million men and women.

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