Fed Limits Ability Of People Under 21 To Get Credit Cards


credit-cardsThe US Federal Reserve finalized new rules aimed at protecting credit card holders Tuesday that also make it difficult for anyone under the age of 21 to obtain a credit card.

As part of a series of new rules aimed at protecting consumers, the measure forbids banks from issuing a credit card to anyone under 21: unless the consumer has the ability to make the required payments or obtains the signature of a parent or other cosigner with the ability to do so.”

The new rules, effective February 22, also prevent lenders from unexpected increases in interest rates on card balances, and limit fees and certain types of interest calculations.

The new measures implement a law passed last year by Congress.

Fed governor Elizabeth Duke said the effort “marks an important milestone in the Federal Reserve’s efforts to ensure that consumers who rely on credit cards are treated fairly.”

“The rule bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts,” Duke added.

The American Bankers Association praised the new regulations.

“These rules — the most comprehensive ever seen — herald a new era for America’s credit card customers,” said Kenneth Clayton, senior vice president at the ABA.

“Many practices that frustrated customers have been eliminated, and credit card users will now benefit from greater control and clearer terms for their accounts.”

The ABA said the new law “ends confusing billing practices, instituting new rules that are easier to understand.”

Due dates will be the same every month, and interest charged on a so-called “double-cycle billing” will be completely eliminated.

The measure bans fees for payment processing — such as surcharges for paying by telephone, and requires that promotional interest rates on new cards stay valid for six months.

It forbids rate increases on existing balances unless consumers are at least 60 days late paying their bill or the initial rate was a promotional rate that has expired, and requires 45 days’ notice to raise rates.

The credit card industry argued the bill could result in a tightening of credit at a time when a credit crunch is already depressing spending amid an economic crisis.

{AFP/NSW/Noam Amdurski-Matzav.com Newscenter}