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Newer rules to strengthen the CARD Act and protect card holders

Saturday, April 09, 2011

In order to strengthen the CARD Act and close the loopholes left behind by the first draft, the Federal Reserve has approved certain amendments to this Act that will come into effect from the 1^st of October, 2011.

According to the first amendment, credit card lenders should not consider the household income of the applicant before approving the credit card application. They should take into consideration the individual income of the applicant. This amendment may make it tougher for non-working professionals to obtain a card for their needs.

The second amendment stipulates that the banks cannot go back on the promotional offers offered on the credit cards. As per the amendment, banks can neither revoke the introductory interest rate nor increase the rate on the current outstanding balance of the card holders until they are 60 days late in making the payment.

The third and final amendment is targeted towards cards that levy high fees on cardholders. A few cards, in fact, levy fees even before the card is dispatched to the customers. According to the new amendment approved by the Federal Reserve, banks cannot levy fees that are over 25% of the overall credit limit on the card for the first year.

All these three new amendments, according to financial analysts, are great for customers. These new rules are not only easy to understand, but they also give consumers what they want. While there is still a need to tighten rules pertaining to disclosure, the credit card industry is surely getting transparent by the day.