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Fed limits CARD Act minimum payment warnings to credit cards
WASHINGTON (9/30/09)--Proposed amendments to Regulation Z released by the Federal Reserve today would limit the required minimum payment warning disclosures outlined in the Credit Card Accountability, Responsibility and Disclosure (CARD) Act to credit card accounts. "The Credit Union National Association (CUNA) has urged the Fed to limit these minimum payment warning disclosures to credit cards for weeks," said Deputy General Counsel Mary Dunn. These disclosures must be provided on periodic statements and must describe the affect that making only minimum payments has on the amount of interest that is paid and the time it takes to repay the balance. CUNA Senior Assistant General Counsel Jeff Bloch added that CUNA is “pleased that the Fed is using its authority under the Truth in Lending Act to limit these provisions in this manner.” The proposed rule, which would implement the portions of the CARD Act which come into effect on February 22, 2010, is the second stage of CARD Act implementation. Many of these provisions will be similar to Regulation Z rules that addressed open-end lending, which were issued earlier this year. Under the Fed proposal, credit card issuers would be prevented from increasing a borrower’s interest rate during the first year that an account is open. Consumers that are under 21 years of age will generally require a co-signor to open a credit account under the proposed rules, and the increased fees that can sometimes be associated with so-called “subprime” credit cards will also be limited. The proposal will also require that payments which exceed the minimum payment must now be allocated to balances with the highest interest rate first. While most provisions are currently scheduled to come into effect in February or August of next year, Reps. Barney Frank (D-Mass.) and Carolyn Maloney (D-N.Y.) recently introduced legislation that would accelerate the effective date for some portions of the CARD Act to December of this year. CUNA expects that the Fed’s newly-proposed rules, as well as interim final rules that address portions of the CARD Act that came into effect in late August, will be finalized by the end of 2009. Comments on the 900 page proposal are due within 30 days, and CUNA will issue a comment call soon on the new proposal. CUNA will also file a comment letter, working with its Consumer Protection Subcommittee and the CUNA Lending Council.


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