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Fed clarifies credit card rules

By Leslie McFadden ·
Tuesday, October 19, 2010
Posted: 1 pm ET

The Federal Reserve Board proposed a new rule today that would clarify some of its final rules implementing the Credit Card Accountability, Responsibility and Disclosure Act of 2009. The landmark legislation was signed into law May 22, 2009, and rolled out in three stages. The last round of credit card provisions took effect Aug. 22, 2010.

According to the Federal Reserve, the proposed rule would clarify that:

  • Promotional programs that waive or rebate interest charges or fees during a specified period of time are subject to promotional rate restrictions. A card issuer could not revoke the waiver or rebate during the promotional period unless the account has become more than 60 days delinquent. Being one day late with a payment would not trigger finance charges.
  • The limitation on nonpenalty fees that can apply during the first year after account opening would also apply to advance fees charged before the account is opened. That is, nonpenalty fees charged during the first year, as well as fees charged upfront, such as application or processing fees, cannot total more than 25 percent of the credit limit at account opening.
  • Card issuers must consider a person's "independent" income, rather than household income, when determining a consumer's ability to make payments before opening a new credit card account or increasing the credit limit on an existing account. Even if the consumer is asked to provide household income information on the application, the card issuer must obtain "additional information about the applicants' independent income (such as by contacting the applicants)." A card issuer that asks for "income" and not "household income" on the application would not need to verify whether the stated income is really household income.

There is an exception for spousal income if the applicant and spouse live in a community property state: "The Board would clarify that, when an applicant's spouse is not a joint applicant or joint accountholder, a card issuer may consider the spouse's income or assets to the extent that a federal or state statute or regulation grants the applicant an ownership interest in that income or those assets."

You can read the full proposal here. Instructions for commenting on it are near the top of the 234-page document.

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Leslie McFadden
October 20, 2010 at 1:18 pm

Lorna, I would check with the card issuer. Perhaps when you opted out of the rate increase the account was not actually closed. If you act quickly, you may be able to close the account before the issuer applies the fee.

consolidate credit
October 20, 2010 at 1:05 pm

This latest fed clarification of credit cards rules will go a long way towards curbing credit card issuers and protecting credit card recipients. Consumers need doses of information and simplified content since most don't emerge with basic knowledge of economics from high school.

Financial procedures like how to consolidate credit, how to work out net worth and budgeting are concepts every participant in the economy should know.

Lorna Brown
October 20, 2010 at 12:37 pm

I recieved letters from most of my credit card companies stating that I will now be paying a yearly fee. I closed these accounts last year when I recieved my notice of increased interest rates to go into effect in Feb. this year due to the new CCA. I chose to opt out and the accounts were closed. These letters did not state then that there would be anual fees imposed even on closed accounts. I tried to research this and I was reading the CCA itself which is somewhat confusing and the only entry I could find was something about not being imposed any fees if I didnt break any rules. I couldnt tell if it covered anual fees and should the credit card companies be allowed to start charging anual fees when they werent prior to closing the account. Does anyone have any insight in this?