|
WASHINGTON
— New federal credit card rules that kicked in Monday
outlaw the most egregious industry practices, such as
retroactive interest rate increases and hidden fees,
that have cost customers billions of dollars a year.
But Obama
administration officials and consumer advocates said the
landmark provisions needed to be followed by the
creation of a regulatory agency that can ensure that the
new standards are enforced and that can quickly rein in
any new unfair fees or practices.
"Now
that these really strong rules are in place, we need a
strong agency to enforce them," said
Pedro Morillas
, consumer advocate for the
California Public Interest Research Group
. He was in
Washington
Monday lobbying lawmakers for the Obama administration's
proposed Consumer Financial Protection Agency.
The
rules, passed by Congress in May, seek to "level
the playing field" between consumers and credit
card companies, President
Barack Obama
said. But that field needs the new consumer agency to
replace the fractured oversight of seven regulatory
bodies that failed to prevent the abusive credit card
practices, said
Michael Barr
, assistant Treasury secretary for financial
institutions.
Among the
changes that took effect Monday:
—Increased
interest rates cannot be applied retroactively to
existing balances. New rates can only apply to new
charges.
—The
interest rate on a fixed-rate credit card cannot be
increased during the first year an account is open
unless the customer is more than 60 days behind in
making a payment.
—Banks
cannot automatically sign up customers for programs that
allow them to exceed their credit limit for a set fee.
Customers must proactively opt-in to such programs.
—Fees
on a credit card, such as the annual fee, cannot be more
than 25 percent of the card's initial credit limit.
—People
younger than 21 years old must show they can make credit
card payments or have a co-signer to open an account.
—Bills
must show how long it would take to pay off the card's
balance if only the minimum payment is made, and how
much in total the customer would end up paying.
—Payments
over the minimum must be applied to the balance with the
highest interest rate.
—The
due date for credit card payments must be the same every
month, and payments cannot be due earlier than
5 p.m.
on a business day. Customers have until the next
business day when a due date falls on a weekend or a
holiday.
Those
provisions follow ones that took effect in August
requiring banks to notify customers at least 45 days
before increasing a credit card's interest rate and to
mail statements 21 days before the bill is due, up from
14 days.
A study
by the Pew Safe Credit Cards Project found that
retroactive interest rate increases, and what they
called "hair-trigger" penalties assessed by
banks, such as large fees that apply for going just
$1
over a card's credit limit, cost consumers at least
$10 billion
per year.
Credit
card companies had been trying to offset the expected
loss of such income by reinstating annual fees, cutting
credit limits and raising interest rates before the new
rules kicked in.
"They're
going to have to try to make up the income some place,
or reduce expenses," said
Nessa Feddis
, senior counsel for regulatory compliance at the
American Bankers Association. Credit card companies are
experimenting with new products, and consumers will
determine which ones survive, she said.
"The
credit card companies got the message that they had some
very frustrated customers," Feddis said.
The new
rules will help consumers, but won't solve all the
problems, predicted
Adam Levin
, chairman and co-founder of Credit.com, a Web site that
helps consumers shop for credit.
"At
least we're no longer going to get run over by the train
from behind," he said. "Now we can see it
coming and maybe jump to the next track."
|
