Proposed rules for credit cards will better protect consumers

Remar Sutton, DCU StreetWise Spokesperson

May 2, the Federal Reserve Board proposed rules under the Federal Trade Commission Act (FTC Act) to enhance consumer protection by addressing unfair or deceptive credit card practices by banks. The National Credit Union Administration and the Office of Thrift Supervision (which supervises savings institutions) concurrently proposed essentially the same rules.

Under these rules credit card lenders would be:

prohibited from increasing rates on pre-existing balances except in specific limited circumstances (such as being more than 30 days late with a payment)
prohibited from applying payments in excess of the minimum in ways that maximize interest charges
prohibited from using the “two cycle” method to compute interest
required to apply promotional rates in excess of the minimum payment to higher-rate balances first
required to give a reasonable amount of time to make payments

You can read more about the proposed rules on the Federal Reserve website. You can also file online your own comment on the rules and/or share your experience. Consumers Union notes that consumer comments make a big difference and urges consumers to make their voice heard. StreetWise agrees. Consumers Union offers a consumer tip sheet to help.

The three agencies are also proposing new rules to provide greater consumer protections related to overdrafts in checking accounts.

Breaking news analysis prepared for DCU by Remar Sutton & Associates, May 2008.

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