The Federal Reserve has proposed rules to simplify the disclosure of credit-card terms to consumers.
The planned overhaul would be the first major review of disclosure requirements since the early 1980s, and is largely aimed at improving consumer protections.
Among the proposed changes:
- Credit solicitations would have to frankly display information about penalties and payment-allocation methods;
- Periodic statements would contain a warning on the consequences of paying only the minimum required payment; and,
- Creditors would have to provide 45 days' notice before increasing an interest rate due to delinquency or default.
The changes will now be put out for public comment over the next 120 days. After the review period, the Fed can implement the new rules, though enactment isn't expected until 2008.In a statement, Senate Banking Committee Chairman Christopher Dodd, D-Conn., said that, "Improved disclosure is not in and of itself sufficient to protect consumers. I've introduced measures to address these issues in the past and am committed to continuing to look at any and all options -- including federal legislation -- to protect consumers."
Another proposal circulating in Washington would curb the ability of credit issuers to increase penalties and charge higher interest rates on pre-existing debt.
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