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New rules regarding credit card accounts

The Federal Reserve has finally announced final rules amending Regulation AA to prohibit  banks from engaging in unfair or deceptive practices with regard to credit card accounts. Among other things, the new rules:

  • Prohibit banks from considering a payment as late unless the bank provided a reasonable amount of time — at least 21 days — for the consumer to make the payment
  • Require banks to allocate any payment exceeding the minimum payment to the balance with the highest interest rate, or to prorate the excess payment amount among all the balances
  • Prohibit banks from calculating interest using the “two-cycle billing” method
  • Require banks to disclose, at an account opening, all interest rates that will apply to the account, and to refrain from increasing those rates, except in certain circumstances
  • Prohibit banks from financing security deposits and fees for credit availability (such as account-opening fees or membership fees) if such assessed charges would exceed 50 percent of the inital credit limit within the first 12 months
  • Limit the security deposits and fees charged at account opening to 25 percent of the initial credit limit and require any additional amounts charged (up to 50 percent of the credit limit) to be spread evenly over at least the next five billing cycles

While these new final rules won’t finally take effect until July, 2010, there are some rumblings aimed at getting Congress to pass similar rules sooner. Finally…

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