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New credit card laws - Part 2

Wednesday, March 3, 2010

Late payment deadlines and penalties

If the issuer imposes a late fee, it must be clearly disclosed on your statement. And if the card issuer will raise your interest rate because you make a payment late, the new interest rate must also be clearly disclosed on the statement.

Internet posting of credit card agreements

Creditors will be required to create and maintain an Internet site on which they post copies of their cardholder agreements. Copies must also be given to the Federal Reserve Board, which will maintain a central repository of consumer credit card agreements, and make them easily accessible and retrievable by the public.

Prevention of deceptive marketing of credit reports

Advertisements for free credit reports must clearly disclose that free credit reports are available under Federal law at: AnnualCreditReport.com. Television and radio ads must disclose "This is not the free credit report provided for by Federal law." The Board will develop rules that detail the requirements in this section.

Procedure for timely settlement of estates of decedent obligors

The Board, in consultation with the Federal Trade Commission and other agencies will develop regulations to require credit card issuers to establish procedures to ensure that any administrator of an estate of a deceased debtor can resolve outstanding credit balances in a timely manner.

Protection of young consumers

No credit card may be issued to a consumer under the age of 21, unless he or she has submitted a written application to the card issuer that meets the following requirements:

The signature of a cosigner, including the parent, legal guardian, spouse, or any other individual who has attained the age of 21 who has the means to repay debts incurred by the consumer in connection with the account, or financial information indicating that the person under the age of 21 has the ability to independently repay the debt.

If a parent or other adult has cosigned a credit card to someone under the age of 21, the card issuer may not increase the credit limit on the account without the cosigner's written approval.

Prescreened credit offers may not be sent to those under the age of 21 unless they have opted in with the credit reporting agencies to receive such offers.

Colleges and universities must publicly disclose contracts or agreements made with a card issuer or creditor for the purpose of marketing a credit card.

Card issuers and creditors may not offer a student at an institution of higher education any tangible item to get them to apply for a credit card if the offer is made on or near campus, or at an even sponsored by or related to the college or university.

Colleges and universities will also be encouraged to limit on-campus marketing of credit cards, and offer credit card and debt education, and counseling sessions, as a regular part of new student orientations.

In addition, creditors will be required to submit a report to the Board describing the terms and conditions of all business, marketing, and promotional agreements and college affinity card agreements with colleges and universities, alumni organizations or foundations affiliated with or related to such institutions, with respect to any college student credit card issued to a college student at such institution.

The Comptroller General of the United States shall, from time to time, review these reports and periodically submit a report to Congress on the impact of these arrangements have on credit card debt. The Comptroller General will make legislative or administrative recommendations it determines to be appropriate.

Gift cards

Generally, issuers cannot impose a dormancy fee, inactivity charge or fee, or a service fee with respect to a gift certificate, store gift card, or general-use prepaid card unless there has been no activity with the previous 12 months, required disclosures (that describe these fees) have been made, and no more than one fee is charged per month.

Also, it is generally illegal to sell or issue a gift certificate, store gift card, or general-use prepaid card that is subject to an expiration date unless the expiration date is at least five years in the future, and the terms of expiration are clearly and conspicuously stated.

Further study required

Several issues were not directly addressed in this legislation. Instead, Congress ordered further study on these topics before deciding on a course of action.

Study and report on interchange fees

The Comptroller will conduct a study on use of credit by consumers, interchange fees, and their effects on consumers and merchants. (The interchange fee is the fee merchants pay to credit card companies when they accept credit cards for payment.)

By 180 days after the date of enactment of this Act, the Comptroller shall submit a report to two Congressional committees containing a detailed summary of the findings and conclusions of the study required by this section, together with recommendations for legislative or administrative actions.

Board review of consumer credit plans and regulations

Not later than two years after the effective date of this Act and every two years thereafter, except as provided in subsection (c)(2), the Board shall conduct a review, within the limits of its existing resources available for reporting purposes, of the consumer credit card market, including: the terms of credit card agreements and the practices of credit card issuers; the effectiveness of disclosure of terms, fees, and other expenses of credit card plans; the adequacy of protections against unfair or deceptive acts or practices relating to credit card plans; and whether or not, and to what extent, the implementation of this Act and the amendments made by this Act has affected cost and availability of credit, (particularly with respect to non-prime borrowers); the safety and soundness of credit card issuers; the use of risk-based pricing; or credit card product innovation.

Comments will be solicited from consumers, credit card issuers, and other interested parties, such as through hearings or written comments. A summary of this review will be published and the Board will either propose new or revised regulations or interpretations to update or revise disclosures and protections for consumer credit cards, as appropriate; or state the reason for the determination of the Board that new or revised regulations are not necessary.

Report to congress on reductions of consumer credit card limits

Before May 22, 2010, the Board, in consultation with other banking regulators, must submit a report to Congressional Committees that describes the extent to which, during the 3-year period ending on such date of enactment, creditors have reduced credit limits or raised interest rates applicable to credit card accounts under open end consumer credit plans based on: the geographic location where a credit transaction with the consumer took place, or the identity of the merchant involved in the transaction; the credit transactions of the consumer, including the type of credit transaction, the type of items purchased in such transaction, the price of items purchased in such transaction, any change in the type or price of items purchased in such transactions, and other data pertaining to the use of such credit card account by the consumer; and the identity of the mortgage creditor which extended or holds the mortgage loan secured by the primary residence of the consumer.

This report will also take a look at how these practices have affected low income or minority consumers, and will include suggested regulatory changes.

Board review of small business credit plans and recommendations

The Board will conduct a review of small business credit cards (those used by businesses with fewer than 50 employees), and the credit card market for small businesses, including: the terms of credit card agreements for small businesses and the practices of credit card issuers relating to small businesses; the adequacy of disclosures of terms, fees, and other expenses of credit card plans for small businesses; the adequacy of protections against unfair or deceptive acts or practices relating to credit card plans for small businesses; the cost and availability of credit for small businesses, particularly with respect to non-prime borrowers; the use of risk-based pricing for small businesses; credit card product innovation relating to small businesses; and the extent to which small business owners use personal credit cards to fund their business operations.

By May 22, 2010, the Board must provide a report to Congress that summarizes the review and other evidence gathered by the Board, such as through consumer testing or other research, and make recommendations for administrative or legislative initiatives to provide protections for credit card plans for small businesses.

Small Business Information Security Task Force

The Small Business Administration, in conjunction with the Secretary of Homeland Security, will establish a task force, to be known as the Small Business Information Security Task Force, to address the information technology security needs of small business concerns and to help small business concerns prevent the loss of credit card data.



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