With credit card problems forcing many people into getting debt consolidation loans or looking into credit card counseling, new proposals from the Federal Reserve are aimed at helping people avoid those solutions by placing limits on interest rate hikes.
The proposal announced today from the Fed would amend Regulation Z – the so-called Truth In Lending Act – and would protect consumers from a number of credit card practices.
The provisions – which are scheduled to go into place in February – are the second stage of the Fed’s implementation of the Credit Card Act which was signed into law in May. Among other things, the new rules would generally protect consumers from interest rate increases during the first year of an account. The plan would also limit companies from raising rates that apply to existing balances.
Elizabeth A. Duke, Federal Reserve Governor, says the proposals would be another step toward limiting the practices of credit card firms which negatively affect consumers.
"This proposal is another step forward in the Federal Reserve’s efforts to ensure that consumers who rely on credit cards are treated fairly," she said. "The rule bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts."