December 18, 2008
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News: Credit-Card Regulation Approved Today.
It's finally coming. Regulators from the Washington-based savings-and-loan associations, the Office of Thrift Supervision (OTS), have already approved the bill which bans unfair or deceptive practices in the credit card industry. With the recent turn-down in our economy, the credit card industry is accused of driving hurting Americans deeper into debt with rate hikes and stiff penalties over slight credit card infractions. As the day progresses, the National Credit Union Administration (NCUA) and the Federal Reserve are expected to approve those rules by today's end. OTS' Director John Reich, was quoted in saying: "The rule will enhance public confidence in financial institutions and establish a level playing field for institutions that want to do business fairly without suffering competitive disadvantages."
These rules won't take effect until July 2010. The restrictions do not apply toward cases of legitimate credit card default (over 30 days late). Some of the changes in affect will be: Ø Limiting rate hikes on existing credit card balances. Ø Mandating that consumers are afforded reasonable time to make credit card payments. Ø Requiring approval before hiking credit card APRs. Ø Mandatory provision of at least a 45-day notice before increasing rates on new transactions. Ø On accounts having multiple interest rates, there is a ban on applying payments exclusively to the lowest rate balances before ever applying anything toward the higher rate balances. Ø Double-cycle billing will be banned. ‘Double-cycle billing' is where finance charges are imposed, based on balances from a previous period. Ø Raising rates over defaults not related to the credit card industry
These new rules were brought on by 60,000 complaints to the government from credit card victims. Congress was called on to take aggressive action to stem abusive practices from both, the credit-card and mortgage lending industries. A Senate version of credit-card legislation written by Senate Banking Committee Chairman Christopher Dodd had stalled. Meanwhile New York Democrat Representative, Carolyn Maloney introduced a House version that was approved.
These rules were developed by the agencies with authority under the Federal Trade Commission Act. The Fed is commissioned to rule over banks, while NCUA is commissioned to rule over credit practices. According to Chairmen for the Senate Banking Committee and the House Financial Services Committee, more credit card abuse legislation is planned for next year.