On February 22, 2010 the Federal Reserve Board's Special Rules for Credit Card Accounts and Open-end Credit for College Students, contained in new Subpart G, became effective. The new rule establishes a number of new substantive and disclosure requirements to establish fair and transparent practices pertaining to open-end consumer credit plans, including credit card accounts. Among other changes, the rule:
- Limits the application of increased rates to existing credit card balances;
- Requires credit card issuers to consider a consumer's ability to make the required payments;
- Establishes special requirements for extensions of credit to consumers who are under the age of 21; and
- Limits the assessment of fees for exceeding the credit limit on a credit card account.
These rules apply primarily to credit card accounts for a consumer under an open-end (not home-secured) consumer credit plan. This includes any open-end credit account accessed by a credit card, except:
- A credit card that accesses a home-equity plan; or
- An overdraft line of credit accessed by a debit card.
The new rules have a major impact on those who offer card accessed credit. Procedures to assure compliance with the rules must be in place now.
This two-hour program explains the new open-end credit rules including the:
- Prohibition against opening or increasing an account unless the consumer's ability to make the required minimum payment has been verified;
- Limitation on fees during the first year after account opening;
- Requirement to apply any excess payment to the balance bearing the highest APR;
- Prohibition on the use of the two-cycle method of calculation of finance charges;
- Prohibition on increasing the APRs, fees and charges under certain circumstances;
- Requirements for over-the-limit transactions;
- Reporting and marketing rules for college student open-end credit; and
- Requirement to report credit card agreements to the FRB and to post agreements on the financial institution's website.
The program is designed for compliance officers, auditors, credit department managers, and lending and operations personnel impacted by the changes.