Fed Requires New Disclosures in Monthly Credit Card Statements
On September 29, the Federal Reserve proposed 841 pages of rules designed to protect consumers from costly credit card practices. These proposed rules represent the second stage of the Federal Reserve’s implementation of the Credit CARD Act signed into law by President Obama in May.
In this document, the Federal Reserve requires credit card issuers to include a number of new disclosures beginning with the February statements sent to their customers:
* Issue a warning about the hazards of only making the minimum payment. Paying only the minimum payment increases the interest you will pay and the time it takes to pay it off. This warning must be placed in a table and shown in a prominent location.
* Disclose the total cost and the time it will take to pay off the entire balance if you only make the minimum payment.
* Disclose the monthly payment amount required to pay off the balance in 36 months and the total cost of paying off the balance in that three-year period.
* Disclose the fee and the penalty APR that the cardholder could receive after a late payment. Issuers must also include the earliest date on which the late fee can be charged.
* The due date must be the same numerical day and month for each billing cycle. This predictability makes it easier for cardholders to make their payment on time. If the due date is on a holiday and a mailed payment arrives on the day after the holiday, the payment is to be considered on time.
* Prohibits fees for making a payment, except payments involving expedited service.
* Credit card issuers must provide contact information for at least three debt counseling services that have been approved by the U.S. Trustees.
The Federal Reserve consumer tested these disclosures to help make them easier for cardholders to understand. Issuers are required to use specific language in these warnings.
The Federal Reserve develops and administers regulations that carry out major federal laws that govern consumer credit protection, such as the CARD Act, the Truth in Lending Act, or the Equal Opportunity Act.