Credit Card Rules Get Fed Boost

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WASHINGTON (TheStreet) -- Credit card issuers should expect a wave of new rules if the Federal Reserve Board moves ahead with proposed its implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009.

On Tuesday the Fed proposed a rule amending the Truth in Lending Act, or Regulation Z, that would offer protections against changes to promotional interest rate and fee programs used to entice new customers.

For example, a card issuer that offers to waive interest charges for six months would be prohibited from revoking the waiver for the promotional period unless the account becomes more than 60 days delinquent, the notice says.

Additionally, fees that a consumer is required to pay before a credit card account is opened are covered by the same limitations as fees charged during the first year after the account, the Fed says. The total amount of those fees also cannot exceed 25% of the account's initial credit limit.

Credit card issuers must also consider information regarding the consumer's independent income, rather than household income, when evaluating whether the consumer is credit worthy for a new card or looking to increase their limit on an existing credit card, under the proposed rule..

The rule proposals are intended to "enhance protections for consumers and to resolve areas of uncertainty so that card issuers fully understand their compliance obligations," according to the notice posted in the Federal Register.

Banks including large card issuers like Citigroup, JPMorgan Chase, Bank of America and Wells Fargo, as well as smaller institutions, are struggling with the plethora of new rules coming from new financial reform measures enacted as a result of the crisis in addition to changes to protect consumer interests when it comes to exorbitant credit card fees.

The Credit Card Act was enacted in May 2009. The final group of Credit Card Act rules went into effect in August.

Bank of America's credit card revenue dropped $235 million compared to the prior-year quarter as a result of the Card Act, according to third-quarter earnings presentation materials.

Citi said on Monday during third-quarter earnings that revenue impact from the Card Act on its branded cards this year is likely to be at the lower end of its previously disclosed range of $400 million to $600 million.

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