On Thursday, the Federal Reserve approved new rules for the credit card industry which – among other things – mandates that providers must give customers 45 days’ notice before changing the terms of their account.
The regulations – which take effect in July 2010 – also prohibit credit card companies increasing the interest rate on an existing balance – only on future purchases or cash advances.
And among the other changes is the stipulation that providers apply any payment that is greater than the minimum to the highest-rate balance. This will affect people who have credit card debt, including balance transfers and cash advances, at different rates than purchases.
Announcing the changes, Federal Reserve chairman Ben Bernanke said, “These protections will allow consumers to access credit on terms that are fair and more easily understood.”
However, perhaps unsurprisingly, the credit card industry has questioned whether the rules will actually benefit all consumers.
American Bankers Association president and chief executive Edward Yingling suggested that they could result in “increased costs for most card users and reduced credit availability – particularly for consumers with lower credit scores or limited credit history.”
The idea is that these limits will cut into the profits of the credit card firms, which means they will be forced to recoup their money by raising rates or reduce their potential losses by denying credit.
With the country currently in recession and access to credit a prime concern for the U.S. government, his statements should give the Federal Reserve something to think about before the new rules take effect.
In the meantime, the average consumer can breathe a sigh of relief that some of the more unfair practices within the credit card industry are finally being regulated.
Similar Posts:
Recent Comments