Rules to protect credit card holders in Canada
By Canadian Vending
By Canadian Vending
May 21, 2009 – Toronto – The federal government has proposed a new set of regulations for credit card companies aimed at both protecting consumers and keeping them better informed about their debts but stopping well short of suggesting a cap on interest rates.
May 21, 2009 – Toronto – he federal government has proposed a new set of regulations for credit card companies aimed at both protecting consumers and keeping them better informed about their debts but stopping well short of suggesting a cap on interest rates.
Under the new measures, credit card holders will get a minimum 21-day interest-free grace period on all new purchases when they pay their balance in full.
"These proposed amendments will ensure Canada remains at the forefront of consumer protection in the financial services sector,'" said Finance Minister Jim Flaherty.
A highlight of the proposed rule changes is the institution of a mandatory minimum 21-day interest-free grace period on all new credit card purchases when a customer pays the outstanding balance in full.
"Right now the situation is that credit cards offer 15- to 24-day grace periods with most offering 21 days. However, many cards also charge consumers interest that accrues during that period, even if they pay their balance in full that month," Flaherty said.
"Moreover, if a consumer carries a balance from one month to another, some cards essentially give that consumer no grace period on new purchases, they charge interest on the full balance immediately on both the previous balance and the new purchases.''
Under the new regulations, monthly statements would also be required to indicate how long it will take to pay off a credit card balance making only minimum payments. The move is intended to give consumers a truer picture of their debt load, Flaherty said.
A new summary box would appear on bills clearly setting out key features, such as interest rates and fees.
Credit card companies would also find some debt collection practices prohibited. They would not be allowed to contact customers or their families outside of specified hours on weekdays and weekends.
The proposed regulations also include:
- Advance notice on monthly statements if interest rates are going to increase during the next statement period.
- Lower interest costs by mandating allocations of payments in favour of the consumer.
- Express consent from the consumer for credit limit increases.
The proposal did not address the issue of interest rates charged by credit card companies, nor did it speak to credit card interchange fees.
Flaherty noted that Parliamentary committees are currently looking at interchange fees and said the government will, "continue to follow these committees closely.''
The government will begin hearing submissions from stakeholders on the proposed rules June 13.