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Your Black Money: Credit Card Companies Get Strong New Regulations


Starting in July 2010, consumers will get a big blanket of protection. But banks claim that the cost — about $10 billion a year — will ultimately hurt consumers.


Federal regulators have adopted sweeping new rules for the credit card industry that will shield consumers from arbitrary increases in interest rates and inadequate time to pay the bills, among other changes.

Credit card companies will be allowed to raise interest rates only on new credit cards and future purchases or advances, rather than on current balances.

The changes, which take effect in July 2010, mark the most sweeping clampdown on the credit card industry in decades. They were approved this morning by the Office of Thrift Supervision, a Treasury Department division. The Federal Reserve and the National Credit Union Administration were expected to act on them later in the day.

John Reich, the thrift agency’s director, said the rules “will enhance public confidence in financial institutions and establish a level playing field for institutions that want to do business fairly without suffering competitive disadvantages.”

The rules also restrict such lender practices as allocating all payments to balances with lower interest rates when a borrower has balances with different rates.

They also could make it more difficult for millions of people with bad credit to get what is known as a subprime card carrying higher interest rates, some experts say.

The new rules prohibit:

  • Placing unfair time constraints on payments. A payment could not be deemed late unless the borrower is given a reasonable period of time, such as 21 days, to pay.
  • Placing too-high fees for exceeding the credit limit solely because of a hold placed on the account.
  • Unfairly computing balances in a computing tactic known as double-cycle billing.
  • Unfairly adding security deposits and fees for issuing credit or making it available.
  • Making deceptive offers of credit.


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