The Federal Reserve Board issued final rules yesterday amending Regulation Z and implementing certain provisions of the Credit Card Accountability and Disclosure Act of 2009. Most of the rules are effective February 22, 2010. A couple are already in place. The final rules are more than 1500 pages long counting the commentary, but are summarized in the Fed’s press release. Click here to see the release. These are the 15 high points:
1. Lenders must give borrowers 45 days notice before they can increase interest rates and make significant changes in terms of the credit card relationship. (This requirement is in effect now and has been since August 20, 2009 under the CARD Act.) This 45 day notice does not apply to cards with variable interest rates, to rates taking effect after an introductory period expires, or when the borrower fails to abide by a workout agreement.
2. Lenders cannot increase credit card rates in the first 12 months after a borrower opens an account. This rule does not apply if any of the 45 day exceptions apply or if the person is more than 60 late in paying his credit card bill.
3. Increased interest rates will only apply to new charges on a card. In other words, even if someone is late on a payment and a new interest rate kicks in, the new rate can only apply to new charges.
4. The monthly credit card statement must include information about how long it will take to pay off a credit card balance if the customer only makes minimum payments. Late payment warnings must be included. These let a person know how much his interest rate will go up if he pays late. Minimum payment warnings must also be given. These let borrowers know how long it will take to payoff a balance if they make only minimum payments. They also let the customer know how much more he will have to pay over time if he only pays the minimum.
5. The card company cannot charge over limit fees unless the borrower agrees to exceed his limit. Only one over limit fee can be charged per billing cycle.
6. A card issuer must consider the borrower’s ability to pay before issuing a card or increasing a credit limit. This includes looking at debt to income and debt to asset ratios and income after pay existing debt obligations.
7. A borrower who is under the age of 21 must have a cosignor to open a credit card account, unless that borrower can prove that he is able to make the payments. In most cases, this will require the younger borrower to show that he has a job sufficient to cover minimum payments on the full proposed credit line.
8. The card company must mail and deliver the credit card bill at least 21 days before payment is due.
9. Payments must be due on the same day of each month.
10. The payment cutoff time cannot be earlier than 5:00 p.m. on the day due.
11. If the payment is due on a weekend or a holiday, then the borrower will have until the following business day to pay.
12. Payments must be applied to highest balances first. If more than one interest rate applies, then the credit card company must apply all payments to the amount subject to the highest rate first.
13. Credit card companies can only post interest charges on balances during the current billing cycle. Double cycle billing is not allowed.
14. Credit card agreements must be posted on the issuer’s website.
15. No fees can be charged for making a payment unless it is for expedited service.
The Fed also withdrew regulations that it issued on January 29, 2009. The Fed withdrew these regulations for consistency with the new Credit CARD Act and the final rule.