Financial Crisis News Center

Fed Adopts Final Credit Card Rules

This story appeared in Bank Digest.

The Federal Reserve Board has adopted amendments to Reg. Z—Truth in Lending (12 CFR 226) that are intended to protect consumers from what are felt to be abusive practices by credit card issuers. The rules implement provisions of the Credit CARD Act by finalizing an interim rule that took effect Aug. 20, 2009, and they also implement Credit CARD Act provisions that take effect Feb. 22, 2010. In addition to adopting these final rules, the Fed has withdrawn proposed amendments to Reg. Z and to Reg. AA —Unfair or Deceptive Acts or Practices (12 CFR 227) as they are no longer necessary. The amendments are effective Feb. 22, 2010, although compliance with some provisions is not mandatory until July 1, 2010.

Further Guidance Provided on Credit CARD Act

This story appeared in Bank Digest.

The Federal Deposit Insurance Corp. has updated the information it provided in FIL-44-2009 regarding statutory amendments to the Truth in Lending Act made by the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act). In its latest guidance, the FDIC has provided information regarding amendments made by the Credit CARD Technical Corrections Act of 2009, which narrowed the scope of application of the Credit CARD Act’s requirement that creditors mail or deliver periodic statements at least 21 days before the payment due date to credit card accounts only.

OTS Guides on TILA Changes

This story appeared in Bank Digest.

The OTS has provided guidance on changes to the Truth in Lending Act (TILA) made by the Credit Card Accountability Responsibility and Disclosure (Credit CARD) Act of 2009 and the Credit CARD Technical Corrections Act of 2009. According to the agency, TILA now states that a creditor may not treat a payment on a credit card account under an open-end consumer credit plan as late for any purpose, unless the creditor has adopted reasonable procedures designed to ensure that each periodic statement is mailed or delivered to the consumer at least 21 days before the payment due date. This correction was effective Nov. 6, 2009.

GAO Reports on Effects of Interchange Fees

This story appeared in Bank Digest.

Merchant costs for accepting credit cards have increased as consumers have used cards more often, according to a GAO Merchant costs for accepting credit cards have increased as consumers have used cards more often, according to a GAO report required by the 2009 Credit Card Accountability, Responsibility, and Disclosure Act. The agency attributed some of that increase to how Visa and MasterCard have competed for card issuers by increasing the number of interchange fee categories and the level of these fees. For some issuers, such as community banks, these fees generate significant revenue, and they also have been among large banks' most profitable activities. The report considers four options for reducing such fees but notes that implementation problems exist for each.

House Passes Expedited Credit Card Reform Bill

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

The House of Representatives voted 331 to 92 on November 4 in favor of H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009, which would speed up the effective date of credit card reform legislation from Feb. 22, 2010, to immediately upon signing of the bill.

The bill was introduced in reaction to reports that credit card companies were abusing the grace period by altering rates and terms after President Obama signed reform legislation in May. A recent report from The Pew Charitable Trusts found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks’ cost of lending declined.

House Passes Expedited Credit Card Reform Bill

This story appeared in Bank Digest.

The House of Representatives voted 331 to 92 on Nov. 4, 2009, in favor of H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009, which would speed up the effective date of credit card reform legislation from Feb. 22, 2010, to immediately upon signing of the bill. The bill was introduced in reaction to reports that credit card companies were abusing the grace period by altering rates and terms after President Obama signed reform legislation in May. A recent report from The Pew Charitable Trusts found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks’ cost of lending declined. H.R. 3639 includes a provision that allows any card issuer to be exempt from the earlier effective date if they adopt a moratorium on interest rate increases on current balances and new balances incurred between the date of enactment and Feb. 22, 2010. The bill would also exempt small credit card issuers that frequently outsource computer programming functions, and gift card providers.

http://www.house.gov/apps/list/press/financialsvcs_dem/presscredit_110409.shtml

Dodd Introduces Bill to Immediately Freeze Credit Card Interest Rates

This story appeared in Bank Digest.

Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., introduced a bill to immediately freeze credit card interest rates, fees and finance charges on existing balances. The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, enacted in May, prevents arbitrary interest rate, fee and finance charge increases on a customer’s existing balance. It requires 45 day notification of interest rate increases, and increases from 14 days to 21 days the amount of time before a bill is due that a statement must be delivered. According to a Banking Committee press release, “Unfortunately, credit card companies have been jacking up rates in a last ditch effort to squeeze customers before all of the bill’s provisions can take effect.” Dodd’s bill would force companies to immediately freeze rates, finance charges and fees on existing balances until the remaining provisions in the Credit CARD Act go into effect. “We worked long and hard to enact the safeguards included in the Credit CARD Act,” said Dodd. “But as soon as it was signed into law, credit card companies were looking for ways to get around the protections this Congress and the American people demanded. This bill would end those abuses and further protect customers today.”

http://banking.senate.gov/public/index.cfm?FuseAction=Newsroom.PressReleases&ContentRecord_id=9229fdac-acc8-f78e-3f79-2aed0eb2e24c&Region_id=&Issue_id

Financial Service Committee Approves Earlier Credit CARD Act Effective Date

This story appeared in Bank Digest.

The House Financial Services Committee approved a bill that would advance the effective date for the remaining provisions of the Credit CARD Act to Dec. 1, 2009. The change would not apply to prepaid gift cards or to small credit card issuers—those with fewer than 2 million accounts.

http://www.house.gov/apps/list/press/financialsvcs_dem/presscc_102209.shtml

Credit Card Acceleration Bill Passes House Panel

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

Legislation that would bring forward the implementation date of credit card legislation to Dec. 1, 2009, from the original date of February 2010, cleared the House Financial Services Committee October 22. Proponents of the bill argue that some credit card companies have raised rates and fees in anticipation of the new rules.

H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009, would maintain the original implementation date for issuers with fewer than 2 million cards in circulation, which accounts for about 10 percent of the market. The bill also would eliminate the accelerated date for gift card issuers.

Dodd Calls on Credit Card Companies to Follow BofA’s Commitment

This story appeared in Bank Digest.

Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., called on credit card companies to follow Bank of America's commitment to not raise interest rates or change terms on customers until consumer protections included in the Credit CARD Act go into effect. In a letter to Dodd, the director of Bank of America's Federal Government Relations wrote that the bank would not implement any changes to consumer credit card accounts prior to the effective date of the Credit CARD Act. “Every other credit card company should follow suit,” said Dodd. “This Congress has made it clear that abusive credit card practices are no longer acceptable.”