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Cascade: No. 70, Winter 2009

New Rules on Credit Card Practices and Disclosures

The Federal Reserve Board of Governors has issued final rules to protect credit card users. These rules prohibit certain unfair acts or practices and improve the disclosures received by consumers in connection with credit card accounts and other revolving credit plans.

Federal Reserve Chairman Ben S. Bernanke said: “The revised rules represent the most comprehensive and sweeping reforms ever adopted by the Board for credit card accounts. These protections will allow consumers to access credit on terms that are fair and more easily understood.”

The new rules, which take effect on July 1, 2010, contain provisions that:

  • Protect consumers from unexpected interest charges;
  • Forbid banks from imposing interest charges using the “two-cycle” billing method;
  • Require that consumers receive a reasonable amount of time to make their credit card payments;
  • Prohibit the use of payment allocation methods that unfairly maximize interest charges; and
  • Address subprime credit cards by limiting the fees that reduce
    the amount of available credit.*


In addition, the Board adopted final rules that revise the disclosures received by consumers in connection with credit card accounts and other revolving credit plans, ensuring that information is provided in a timely manner and in a readily understandable form. The rules, which amend Regulation Z (Truth in Lending), require changes to the format, timing, and content of credit card applications and solicitations and the disclosures received by consumers throughout the life of an open-end account. The rules follow a comprehensive review of open-end credit New Rules on Credit Card Practices and Disclosures rules. Many of the changes reflect the results of consumer testing conducted on behalf of the Board during its review. These rules also take effect on July 1, 2010.

Electronic Fund Transfers

Separately, the Board issued for public comment proposed amendments to Regulation E, which concerns electronic fund transfers, to provide consumers with a choice regarding their institution’s payment of overdrafts for automated teller machine withdrawals and one-time debit card transactions. Two alternative approaches are proposed. The comment period ends 60 days after publication in the Federal Register.

Disclosure Practices Regarding Overdraft Services

Finally, the Board adopted final amendments to Regulation DD (Truth in Savings) to address disclosure practices related to overdraft services of depository institutions. The rules take effect on January 1, 2010.

For the December 18, 2008, press release, go to www.federalreserve.gov External Link and select News and Events.

  • *The rules were adopted under the Federal Trade Commission Act and were issued concurrently with substantially similar final rules by the Office of Thrift Supervision and the National Credit Union Administration.

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