'Regulation Z' overhaul to change credit card fine print rules

Proposal seeks to help consumers understand credit card terms

By Connie Prater

The Federal Reserve Board has proposed the most sweeping and consumer-friendly changes in nearly 30 years to Regulation Z, the section of the Truth in Lending Act that governs how consumers are notified of the terms and conditions of credit card and other revolving (open-ended) loans.

45 days' notice Fixed rates APR disclosures Fee disclosures Account opening disclosures Periodic statement disclosures Changes in credit card terms Minimum payments Subprime credit cards

The last time the Fed made substantial changes to the regulation was in 1981. These changes come in the context of a card industry that has shifted the way it makes money, relying more on fees and less on interest rates, and a regulatory and political climate that has turned hostile to the industry. (See what consumers and credit issuers have to say about the proposed changes.)

In addition to the Fed, Congress is considering several bills designed to stop some of the most objectionable credit card industry practices. Many of those reforms are not covered by the Fed's proposed changes in mandatory disclosures. The industry, for the most part, opposes the additional regulation.

Regulation Z amendments cover the format (table versus text, type size and paper size) and content (fees, annual percentage rates, finance charges) of credit card disclosures to consumers. The regulation spells out five different types of disclosures creditors must provide during the "life cycle" of a credit card account: application and solicitation disclosures, account-opening disclosures, periodic (monthly) statement disclosures, change-in-terms notices and advertising provisions.

The Fed's Board of Governors is likely to vote on the final rule changes sometime in 2008.

These are some of the major changes under consideration:

• 15-day notice increased to 45 days
• 'Fixed' rates are really 'fixed'
• APR disclosures
• Fee disclosures
• Account-opening disclosures
• Periodic statement disclosures
• Changes in terms
• Minimum payments
• Subprime credit cards

Source: U.S. Federal Reserve Board

Freelance writer Gregory Taggart contributed to this report.

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Published: December 26, 2007 Comments or questions, Story archive

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