Fed issues final rules on first phase of Credit CARD Act

Starting Aug. 20, 2009, card users must get 45 days' notice of changes

By Connie Prater

The Federal Reserve Wednesday issued interim final rules governing how banks should implement the first phase of the new Credit CARD Act of 2009, including instructions on giving consumers the right to opt out of credit card changes.

Signed into law by President Obama on May 22, 2009, the law, among other things, limits when credit card companies can increase interest rates on existing credit card balances. The majority of the provisions take effect Feb. 22, 2010. However, three provisions are set to begin Aug. 20, 2009. They include:

• Giving consumers at least 45 days' advance notice in writing of interest rate increases and significant changes in terms of credit card agreements. Currently, only 15 days' notice is required.
• Informing consumers in that same written notice of their rights to opt out of the changes and cancel their credit card accounts if they choose to avoid the interest rate increase or other changes. Currently, opting out of rate hikes is not a consumer right,  but a privilege granted by many card issuers.
• Mailing or delivering monthly credit card statements to consumers at least 21 days before the due dates to avoid incurring late fees.

Lawmakers were concerned that waiting until February 2010 to implement consumer credit card protections was too late to help families struggling to pay mountains of credit debt. Mandating that those three provisions start 90 days from enactment of the law was a way to address concerns about delayed implementation. Banking industry representatives had argued that credit card issuers needed 18 months to two years lead time because the law will require significant changes on how banks bill, advertise and market credit cards.

Banks have come under fire from lawmakers in recent weeks because cardholders have seen interest rates increase dramatically, minimum payment amounts double and fees and other charges go up. Banks say they are reacting to the bad economy and increased risk in the market. Critics have accused the banks of increasing rates while they can now -- before the new law restricts rate increases. 

Senate Banking Committee Chairman Christopher Dodd has asked the Fed to fast-track issuance of rules on implementing another aspect of the law -- a provision to require issuers to review interest rate increases that have occurred since January 2009 and, if warranted, decrease the rates for card users who've paid their bills on time. That provision is not scheduled to take effect until August 2010. But Dodd said the recent interest rate hikes are reason to expedite the process.

The Fed has not made a ruling on the fast-track request.

In a press release announcing the interim final rules for phase one of the new credit card law, the Fed indicates the public can comment on the rules within 60 days after they are published in the Federal Register. View comments at the Fed's website. 

See related: Credit card reform and you, A comprehensive guide to the Credit CARD Act of 2009, Will new credit card law help or hurt consumers, Feds finalize sweeping new credit card rules 

Published: July 15, 2009

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