March 16, 2010
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News: Round Three of the Credit CARD Act
The Federal Reserve isn't ready to sit quietly and watch as the credit card industry presses on with efforts to find loopholes in the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act 2009 to enable them to continue trampling on Americans. Elizabeth A. Duke, the Federal Reserve Governor announced that a new proposal would prohibit lenders from imposing large penalties for minor infractions by cardholders. Duke said such fees in addition to interest rates are two main areas of concern that the new proposal will address. Not only would the proposal prohibit these fees, it would also require credit card companies to review all rate increases that took effect back to the beginning of 2009 and if deemed necessary to reduce the rate.
The new rules amends the Credit CARD Act provisions of Regulation Z (Truth in Lending) pertaining to late payment penalties and interest rate increases. The effective date would be August 22, 2010. However, prior to the approved final date for implementation, Americans would have an opportunity to review the new rules and submit any comments. The new rule would prohibit lenders from charging cardholders selected fees, including late payment fees and over-the-limit fees that would be greater than the violation. Lenders would be banned from charging inactivity fees and prevent lenders from piling on layers of late payment or other penalties. Additionally, credit card issuers would be required to reveal the reason for any rate increase.
Debit card users will also receive some benefits from the new rules. As of July 1, 2010, financial institutions would be prohibited from assessing over-draft fees resulting from automatic teller machine (ATM) and debit card transactions without the acceptance of an overdraft service and related fees by the consumer. If the rules pass as expected, this will be the third round of the Federal Reserve's implementation of the 2009 Credit CARD Act, enacted in May 2009.