The Federal Reserve regulators have recently announced their commitment to close in on the gap in the CARD Act. The changes to the rules in the act have been met by growing cardholder insecurity, regarding interest hikes and reduction of credit limits.
The Federal Reserve Board has stated they can use the CARD Act, to enforce the provision requiring banks to seriously look into the payment capacity of individual applicants. They can do this, by ensuring that banks do not just open credit card accounts for new applicants, without first considering if they can pay off on their monthly debts or balances on time.
In the past, the Federal Reserve mentions that applicants have only been obliged to furnish the banks with copies of their household income to open new credit card accounts. The main problem with this kind of requirement, aside from it being self-reported in the first place, was that the reports became more and more erroneous due to miscalculations and other factors like household members maintaining multiple credit card accounts per individual, etc.
The Federal Reserve Board also mentioned in their announcement, they will assist in monitoring cases of credit card issuers marketing their zero percent interest programs or “no interest” rate offers in their promotional credit cards.
Internal business consultant Joe Taylor said, when banks market the zero percent interest rate as a fee waiver, rather than a promotional program, they are more likely to take away the no interest rate program from the credit cardholders without sufficient notification. Taylor also says that the Federal Reserve Board can meaningfully take part in the interest rates for delinquency. He said the Federal Reserve Board must make sure that interest rates in accounts are not changed unless cardholders do not pay for a period of 60 days.
Industry analysts say the aspects by which the Federal Reserve aims to address gaps; will be beneficial in the long run. At this point, Taylor says that the Federal Reserve sends a strong message that they are a regulatory body bent on prescribing pro-consumer aspects of the Credit CARD Act.
Finally, Taylor concludes that the results the Federal Reserve`s contributions are yet to be seen, but at least for now; they have already made commitments to act upon concerns.