On March 18, the Federal Reserve Board approved a rule amending Regulation Z, which implements the Truth in Lending Act.
This rule clarifies aspects of previous Board rules implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009.
This rule states "credit card applications generally cannot request a consumer's 'household income' because that term is too vague to allow issuers to properly evaluate the consumer's ability to pay. Instead, issuers must consider the consumer's individual income or salary," according to the Federal Reserve.
In addition, the Board's rule clarifies that:
- Consumer protections under the Credit CARD Act apply to promotional programs that waive interest rates for a specified period of time. A credit card issuer that offers to waive interest charges for six months will be prohibited from revoking the waiver and charging interest during the six-month period, unless the account becomes more than 60 days delinquent.
- The Credit CARD Act places limits on application and other fees that a consumer is required to pay before a credit card account is opened. These fees are covered by the same Credit CARD Act limitations as fees charged during the first year after an account is opened. The total amount of these fees cannot exceed 25 percent of the account's initial credit limit. So for example, if a credit card issuer charges a $75 fee to apply for a credit card with a $400 credit limit, then the card issuer generally would not be permitted to charge more than $25 in additional fees during the first year the account is opened, according to a Federal Reserve press release.
The rule approved on Friday is "intended to enhance protections for consumers who use credit cards and to resolve areas of uncertainty so that card issuers fully understand their compliance obligations," according to the Federal Reserve.