On Tuesday, January 12, 2010 the Federal Reserve Board approved the final rules amending Regulation Z also known as Truth in Lending in order to implement the provisions of CARD or the Credit Card Accountability Responsibility and Disclosure Act of 2009, which will become effective February 22, 2010.
Some of the high points of CARD Act include
? Prohibition of creditors issuing credit cards to consumers who are under the age of 21 unless the consumer has the ability to make the required payments (think Hannah Montana 😉 ) or gets a parent or legal guardian with the ability to make the payments co-sign.
? Protection for consumers against unexpected increases in interest rates by generally prohibiting rate increase during the first year and also any increases in a rate that applies to an already existing credit card balance.
? Limit of high fees and interest rates associated with sub-prime credit card
? Banning ?two-cycle? billing methods to impose more interest charges by creditors.
? Prohibiting creditors from allocating payments in ways that would maximize interest charges.
? Requiring creditors to obtain consent from the consumer before charging fees for transactions that exceed the credit limit.
Some of the information that you can now expect from your credit card company are
? A 45-day notice of any rate increases such as interest rates, changes in certain fees, such as annual fees, cash advance fees or late fees and any other significant changes on your account. The credit card must give you the option to cancel the card before any fee increases take effect, however, if you do cancel the credit card company has the right to close your account and increase your monthly payment on the remaining balance. These notices are only required if they make a change to your existing terms, for example, if you have a variable rate tied to an index and the index goes up or you obtained your card on a introductory ?teaser? rate and the ?go to? rate was previously disclosed, you will not receive a 45 day notice.
? The credit card statement must now disclose how long it will take to pay off your balance if you only make the minimum payments. It will also include information on how much you would need to pay each month in order to pay the balance off in 3 years.
For a full disclosure of what you should know about the new rules, visit the Federal Reserve System: What you need to know.