Push Is On to Accelerate CARD Reform
The U.S. House Committee on Financial Services is considering recently-introduced legislation, called the Expedited CARD Reform for Consumers Act of 2009, to accelerate the effective date of the Credit CARD Act of 2009. Certain provisions of the CARD Act became effective in August 2009. The Expedited CARD legislation would amend the effective date of the remaining provisions of the CARD Act to December 1, 2009 from February and July 2010.
The Expedited CARD legislation also identifies specific CARD Act provisions to accelerate, including: reviews of past interest rate increases under Section 148(d) of the Truth in Lending Act (15 U.S.C. 1665c(d)); the requirement that penalty fees be reasonable and proportional to the violation, Section 149(b) of the Truth in Lending Act (15 U.S.C. 1665d(b)); and gift card consumer protection provisions.
Portions of Credit CARD Act Go Live
Although most provisions of the Credit CARD Act of 2009 become effective in February and July 2010, pursuant to an interim final rule announced by the Fed to amend Regulation Z as phase one of the Act's three implementation periods, certain provisions of the Act are effective today:
* Creditors must provide written notice to consumers 45 days before the creditor increases an annual percentage rate on a credit card account or makes a significant change to the terms of a credit card account;
* Creditors must inform consumers in the same notice of their right to cancel the credit card account before the increase or change goes into effect. If a consumer does so, the creditor is generally prohibited from applying the increase or change to the account; and
* Creditors generally must mail or deliver periodic statements for credit cards and other open-end consumer credit accounts at least 21 days before payment is due.
"Credit Cardholders' Bill of Rights" is Back for 2009
The "Credit Cardholders' Bill of Rights" has been reintroduced for 2009 in the House as H.R. 627 (a similar bill has been introduced in the Senate as S.B. 235). The bill would make significant amendments to the Truth in Lending Act ("TILA") provisions governing issuance of consumer credit cards, including:
- requiring card issuers to give consumers 45 days notice of any interest rate increases;
- prohibiting card issuers from charging interest on debt that is paid during a grace period (so-called "double cycle billing);
- prohibiting card issuers from increasing rates retroactively on existing balances unrelated to a consumer's card account (so-called "universal default rate increase");
- requiring card issuers to mail billing statements 25 days before the due date and to consider timely any payment received before 5:00 p.m. on the due date;
- restricting terms that may be used in advertisements;
- requiring certain allocations of consumer payments; and
- limiting "over-the-limit" fees card issuers can charge consumers.
The House bill's sponsors note that recent Federal Reserve Rules would address many of the issues covered by the bill, but the Fed rules do not take effect until July 2010.
Comment Period Closes on Credit Card and Overdraft Rules
The comment period has closed for the Federal Reserve's sweeping proposed rule changes for credit cards and overdrafts. The proposed revisions to Regulation AA, revisions to Regulation DD, and revisions to Regulation Z seek to redefine "unfair or deceptive acts or practices" in connection with credit card accounts and overdraft protection services.
The Federal Reserve reports receiving an unprecedented number of comments on these proposed regulations. The Fed received nearly 50,000 comments on the proposed revisions to Regulation AA alone. On a parallel track, the "Credit Cardholders Bill of Rights Act of 2008" (H.R. 5244), which would amend Truth in Lending Act to include new restrictions on billing and practices related to credit cards, is moving to the floor of the House.
"Credit Cardholders Bill of Rights" Passes Committee
The "Credit Cardholders Bill of Rights Act of 2008" (H.R. 5244), which would amend Truth in Lending Act to include new restrictions on billing and practices related to credit cards, has cleared the U.S. House Financial Services Committee and will move to the floor of the House.
As detailed in the summary, the bill's provisions would make significant amendments to existing law, including:
- requiring card issuers to give consumers 45 days notice of any interest rate increases;
- prohibiting card issuers from charging interest on debt that is paid during a grace period (so-called "double cycle billing);
- prohibiting card issuers from increasing rates retroactively on existing balances unrelated to a consumer's card account (so-called "universal default rate increase");
- requiring card issuers to mail billing statements 25 days before the due date and to consider timely any payment received before 5:00 p.m. on the due date;
- restricting terms that may be used in advertisements;
- requiring certain allocations of consumer payments; and
- limiting "over-the-limit" fees card issuers can charge consumers.
These proposed changes follow the Fed's proposed rule changes for credit card and overdraft regulations.
