Circular
Board Proposes Rules to Prohibit Unfair Practices Regarding Credit Cards and Overdraft Services
May 2, 2008
Circular No. 11952

The Federal Reserve Board has proposed rules to prohibit unfair practices regarding credit cards and overdraft services that would, among other provisions, protect consumers from unexpected increases in the rate charged on pre-existing credit card balances.

The rules, proposed for public comment under the Federal Trade Commission Act, also would forbid banks from imposing interest charges using the "two-cycle" billing method, would require that consumers receive a reasonable amount of time to make their credit card payments, and would prohibit the use of payment allocation methods that unfairly maximize interest charges. They also include protections for consumers that use overdraft services offered by their bank.

"The proposed rules are intended to establish a new baseline for fairness in how credit card plans operate," said Federal Reserve Chairman Ben S. Bernanke.  "Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs."

The proposed changes to the Board’s Regulation AA (Unfair or Deceptive Acts or Practices) would be complemented by separate proposals that the Board is issuing under the Truth in Lending Act (Regulation Z) and the Truth in Savings Act (Regulation DD).

The provisions addressing credit card practices are part of the Board’s ongoing effort to enhance protections for consumers who use credit cards, and follow the Board's 2007 proposal to improve the credit card disclosures under the Truth in Lending Act.

See the press release for full details of the proposal.

Press release Offsite