Help for the Credit-Stressed
In a move that will hopefully alleviate some stress for U.S. consumers a report from the Associated Press says federal regulators earlier this week adopted sweeping new rules for the credit card industry that will shield consumers from increases in interest rates on existing account balances among other changes.
The rules, which take effect in July 2010, will allow credit card companies to raise interest rates only on new credit cards and future purchases or advances, rather than on current balances. Amid the economic crisis and rising job losses, consumers - even those with strong credit records - have been defaulting at high levels on their credit cards. Banks already battered by the mortgage and credit crises have been bleeding tens of billions in red ink from the losses. The rules were approved by the Federal Reserve, the Treasury Department’s Office of Thrift and the National Credit Union Administration.
Some of the rules adopted yesterday include: Restrict such lender practices as allocating all payments to balances with lower interest rates when a borrower has balances with different rates; Allow credit card companies to raise interest rates only on new credit cards and future purchases or advances, rather than on current balances; Prohibit placing unfair time constraints on payments.