Feds set new credit card rules
New rules governing the credit card industry have received final approval and will be in effect in the new year, Finance Minister Jim Flaherty said Wednesday.
"By increasing transparency, our government is taking real action to protect consumers," the minister said in a statement.
Among the requirements, lenders must obtain express consent for credit limit increases, provide a summary box on statements to describe all fees, and put limits on debt collection practices.
The new regulations will be largely in effect as of Jan. 1, 2010.
But Ottawa did give lenders some grace in implementing a minimum 21-day, interest-free grace period on all new credit card purchases when a customer pays the outstanding balance in full.
That requirement will not come into effect until Sept. 1, 2010.
Under the new rules, credit card providers must:
- Provide a summary box on credit contracts and application forms that sets out key features, such as interest rates and fees.
- Inform consumers how long it would take to fully repay their balance if they only make a minimum payment every month.
- Mandate an effective minimum 21-day, interest-free grace period on all new credit card purchases when a customer pays the outstanding balance in full.
- Lower interest costs by mandating allocations of payments in favour of the consumer.
- Require express consent for credit limit increases.
- Limit debt collection practices used by financial institutions.
- Prohibit over-the-limit fees solely arising from holds placed by merchants.
- Mandate advance disclosure of interest-rate increases prior to their taking effect, even if this information had been included in the credit contract.
Critics of the bill have called it a largely symbolic act that will ultimately do nothing to help consumers.
"Increasing the font size on a credit card contracts doesn't help Canadian families who are hurting right now," New Democrat MP and consumer protection critic Glenn Thibeault said when the rules were proposed in May. "Interest rates are at an all-time low, yet credit interest rates remain at an all-time high."
The regulations do nothing to offer retailers relief from rising interchange fees — fees merchants pay to the financial firms that operate customer cards every time a transaction is made. In some cases, such fees have nearly doubled in the last two years, Liberal MP and consumer affairs critic Dan McTeague said.
"Like with so many other files, they are throwing the public a few bones," he said. "But [they] are ignoring other very important aspects of this issue, hoping the other glaring problems will simply disappear."
The rules will apply to all credit cards issued by federally regulated institutions such as chartered banks and some retail stores.
Some provisions within the rules have broader applications to products like fixed- and variable-rate loans and lines of credit, the ministry said.