NEW CREDIT CARD RULES

New regulations that apply to credit cards and loans offered by federally regulated financial institutions are now in effect. The regulations enhance consumers’ access to clear information about key details of these financial products, such as interest rates, fees and penalty charges. They also strengthen consumers’ rights by limiting certain business practices of financial institutions

 SUMMARY OF NEW REGULATIONS

Below are some of the key provisions of the new regulations, a brief explanation and the date they came into force. You can also view background information and a complete list of the new regulations of the new regulations.

In force as of January 1, 2010:

  • Information boxes: improved disclosure statementsFederally regulated financial institutions have to include an information box at the beginning of credit card applications and credit agreements. The content of the boxes will vary depending on the financial product, but generally they must clearly set out key features of the application or agreement, such as interest rates, fees and penalty charges.Federal regulations set out the way the information box must be presented. The language and presentation of this information has to be clear and can’t be misleading.Follow this link for an example of what an information box would look like and what information has to be included.
  • Consent for credit limit increases on credit cardsFederally regulated financial institutions have to get your consent before they can increase your credit card limit. If you give verbal consent, the institution must provide confirmation in writing no later than your next statement.
  • No over-the-limit fees because of holdsA federally regulated financial institution can’t charge you a fee for going over your credit limit because of a temporary hold of funds on your credit card. This restriction does not apply if you make a purchase that puts you over your limit in any case during the time the hold is in effect.
  • Debt collection practicesDebt collection practices for federally regulated financial institutions are subject to new regulations.Debt collection regulations govern what debt collectors can and can’t do when they try to collect money from you.For more detailed information on debt collection practices and the applicable regulations, visit our frequently asked questions page on debt collectors and Tips for Dealing with Debt Collectors.
  • Joint borrowersIf you, together with another person (s), apply for a loan from a federally regulated financial institution, the institution must provide key information to all borrowers. However, there are two exceptions to this regulation that allow a financial institution to provide disclosure to only one borrower:
    1. if all of the borrowers consent, verbally or in writing (on paper or electronically), that only one borrower will receive this information to meet disclosure requirements;
    2. if two or more of the borrowers consent, verbally or in writing (on paper or electronically), that one borrower will receive the information on their behalf; in this case, any borrowers who did not consent also have to receive the information.

    When joint borrowers give verbal consent, the financial institution must provide confirmation in writing to the borrower without delay.

 In force as of September 1, 2010:

  • Minimum 21-day grace period on credit card purchasesThe grace period on new purchases made with credit cards will be a minimum of 21 days. That means that you don’t have to pay any interest on new purchases for 21 days after the statement date if you pay your balance in full by the current month’s due date. This provision will apply even if you are carrying a balance from the previous month.
  • Allocation of payments on credit card accountsSome credit card accounts have different interest rates for different types of transactions, such as retail purchases, cash advances and balance transfers. When you make the minimum payment on your credit card account, federally regulated financial institutions can apply the minimum payment portion of your payment however they like. Usually they will apply it against the portion of your balance with the lowest interest rate.However, under the new regulations if you pay more than the minimum amount, the additional amount of your payment now must be applied in one of the following two ways:
    • to the portion of the balance with the highest interest rate, and any remainder to other amounts from highest interest rate to lowest, or
    • proportionally to all portions of the balance.
  • Credit card statementsFederally regulated financial institutions have to include the following information in your credit card statements:
    • Time to repay your balance: the credit card issuer must show you an estimate of how long it will take to pay off the current balance in full if you pay only the minimum required every month.
    • Advance notice of a fixed interest rate increase: if you have a fixed interest rate credit card and the rate could increase in the next period, the credit card issuer must tell you on your statement the circumstances of the increase and the new rate beforehand.