Credit Card Rules Protect Consumers

Consumers have received long overdue protections from abusive practices by credit card issuers . In enacting the most sweeping changes to credit cards in decades, federal regulators on Thursday approved new rules to crack down on unfair and deceptive practices by card issuers.
The rules were issued by the Office of Thrift Supervision and approved later Thursday by the Federal Reserve and the National Credit Union Administration.
The rules, which take effect in July 2010, will let credit card companies raise interest rates only on new credit cards and future purchases or advances, rather than on current balances as is the practice currently. They also restrict other unfair lender practices such as allocating all payments to balances with lower interest rates when a borrower has balances with different rates.
In addition, consumers will have to be given 45 days notice before any changes are made to the terms of an account, including a higher penalty rate for missing payments or paying bills late. Under current rules, companies in most cases give 15 days notice before making certain changes to the terms of an account.
Most of the rules were proposed in May of this year and drew more than 65,000 public comments the largest number ever received by the Federal Reserve.
The Office of Thrift Supervision led the efforts to reform credit cards when, in August 2007, it asked for public comment about financial institutions’ lending practices. As expected, banks have led the opposition to the new rules.
One area that remains unchanged is the practice of credit card issuers placing mandatory arbitration clauses in their contracts with consumers. These clauses force consumers into costly arbitration of disagreements and claims against the companies and deny them access to the courts. There are currently pending bills in Congress to end this unfair practice.