The Federal Reserve Board has proposed yet another round of amendments to the open-end credit provisions of Regulation Z. The proposal aims to implement provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 that become effective on February 22, 2010.

The 841-page proposal was issued on September 29, 2009, but has not yet been published in the Federal Register. Once it is published, the comment period will last only 30 days. A final rule is expected in December.

Of critical importance, the proposal includes a warning in bold type that the Fed might accelerate from July 1, 2010, to February 22, 2010, the mandatory compliance date for the January 2009 final Regulation Z rules. Those rules included new account-opening, periodic statement, and change-in-terms disclosure requirements.

The provisions covered in the latest proposal implement CARD Act provisions that:

  • Prohibit increases in interest rates and certain fees during an account’s first year
  • Prohibit rate increases on existing card balances
  • Require consideration of the consumer’s repayment ability before opening or increasing the credit limit on an account (with special provisions for consumers under age 21)
  • Require affirmative consumer consent to transactions that result in overlimit fees
  • Limit fees on subprime credit cards
  • Require the allocation of any payment in excess of the minimum payment first to the balance with the highest rate
  • Prohibit "double-cycle" billing
  • Restrict fees based on the method a consumer uses to make a payment
  • Require a new minimum payment disclosure on periodic statements

The new Fed action will represent the sixth set of final or proposed new credit card rules published in 2009. In addition to a July 2009 interim final rule implementing CARD Act provisions, effective on August 20, 2009, the Fed published final Regulation Z amendments in January 2009 and proposed clarifications to those amendments in May 2009. Jointly with the other federal banking agencies, the Fed also published in January 2009 a final rule under the FTC Act to prohibit certain credit card practices and published proposed amendments to that rule in May 2009.

Still remaining on the Fed's agenda are regulatory changes to implement the last phase of CARD Act provisions, which become effective on August 22, 2010. Those rules will deal with CARD Act requirements for reasonable and proportional penalty fees and re-evaluation of rate increases.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). For more information, please contact Alan S. Kaplinsky, partner-in-charge, 215.864.8544 or kaplinsky@ballardspahr.com; Jeremy T. Rosenblum, vice partner-in-charge, 215.864.8505 or rosenblum@ballardspahr.com; John L. Culhane, Jr., 215.864.8535 or culhane@ballardspahr.com; Barbara S. Mishkin, 215.864.8528 or mishkinb@ballardspahr.com; or Mark J. Furletti, 215.864.8138 or furlettim@ballardspahr.com.


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