The Federal Reserve Board on Oct. 19 announced a proposed rule to clarify certain aspects of Credit Card Accountability, Responsibility and Disclosure Act that went into effect earlier this year.
The proposal could affect prospective borrowers’ ability to qualify for new credit card accounts, one expert says.
The proposed rule would require issuers to “consider information regarding the consumer’s independent income, rather than his or her household income,” when evaluating whether to approve an account for a prospective customer or when increasing the credit limit on an existing account.
“This opens the door to a number of interpretive issues that could cause headaches for issuers and consumers,” Edward G. Rice, general counsel for Zoot Enterprises, a Bozeman, Mont.-based provider of credit decisioning and loan original software systems. “Among other things, this proposal raises questions about how nonworking spouses might qualify for credit card accounts and whether it will usher in new policies surrounding co-signers.”
The Fed also proposes that cardholder protections for short-term, 0% interest rate card offers would be the same as those for low-interest promotional card offers. As such, issuers would be prohibited from charging interest during the promotional period unless the account is more than 60 days delinquent.
Application fees a cardholder pays before opening a credit card account also would be treated the same as various fees charged during the first year after opening the account. The total amount of such fees cannot exceed 25% of the account’s initial credit limit during the account’s first year.
The proposed rule would amend Regulation Z under the Truth in Lending Act, as required by the CARD Act, which was enacted in May 2009. The rules went into effect this year.
A 60-day comment period on the proposed regulations will begin after the proposed rules appear in the Federal Register.
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