Today, the U.S. Treasury Department’s Office of Thrift Supervision (OTS) approved new rules for the credit card industry; the Federal Reserve and the National Credit Union Administration are expected to approve the same rules later today.  They are supposed to protect consumers from unfair and expensive practices.  But they don’t go into effect until July 2010, although the 16,000 credit card companies in the U.S. are being urged to implement them as soon as possible. 

The OTS summary states the following rules:

1) Interest Rate Changes – Companies must provide a 45 day advance notice before increasing interest rates.  They cannot increase a rate on existing balances until the consumer is more than 30 days delinquent on paying the credit card bill.  Credit card interest rates seem to be changing overnight and without warning; this is designed to require some notice and to reduce the penalties for a payment that is just a few days late.

2) Reasonable Time To Pay - Companies cannot treat a payment as late unless the consumer has a “reasonable amount of time to make the payment”, considered to be 21 days.  This should limit the occurance of a late fee on bills that are due almost immediately upon receipt of the statement.

3) Payment Allocation – The new rule requires credit card payments in excess of the minimum amount due to accounts with different annual percentage rates (APR) be allocated to the highest interest balance or proportionately to all balances.  Consumers generally have no choice as to which APR balances get paid down first, and most credit card companies apply payments to the low or zero interest rate balances first.

4) Double-cycle Billing – Also referred to as “two-cycle” billing, is now prohibited.  This means consumers cannot be charged finance charges based on balances associated with previous billing cycles.  Some companies figure in the previous month’s charges, even if the balance was paid in full.

5) High-fee Subprime Cards – Prohibits the charging of fees to open a credit card that consume the majority of the credit limit on the account.  Fees exceeding 25 percent of the available credit must be spread over no less than the first six months that the account is open.  They can still charge the fees, just not all at once in the first billing cycle.

SUMMARY
This is a topic that will be updated as more information is released and available.  It sounds like the government may get some good PR from it, but the delayed start date along with some of the soft language may not mean much to consumers today.  And we’ll need to wait and see how much, if any, enforcement will be forthcoming from the federal regulators.  Hopefully we’ll see more opportunities for consumer recourse with these regulations than we do with the Fair Credit Reporting Act.