WASHINGTON - The Federal Reserve yesterday issued sweeping new rules designed to better protect Americans from sudden increases in interest rates on credit cards.
The rules, effective Feb. 22, bar rate increases during the first year after an account is opened. After the first year, companies must provide a 45-day notice.
Some lenders have pushed through rate increases ahead of the new rules. That irked lawmakers in Congress who had wanted to speed up implementation of the Fed’s rules.
The new rules also ban - with a few exceptions - increasing the rate on existing card balances. But if, for instance, a customer is behind more than 60 days on a payment, the rate can be boosted.
Credit card companies will need a customer’s consent before charging fees on transactions that exceed their credit limits and will forbid companies from issuing credit cards to people under age 21 unless they - or a parent or other cosigner - have the ability to make the required payments.
Payments will be applied to highest interest-rate balances first, helping customers pay off their balances faster and more cheaply. And due dates will be the same every month.
The Fed wrote the rules to carry out provisions of legislation signed into law last year. Other provisions of that law take effect later this year.