MP Report by Jay Hill, M.P.
“Conservative Government’s New Credit Card Rules Will Protect Consumers”
Most of you will recall that thick little booklet with the tiny writing that arrived in your mailbox along with your new credit card. If you’re like most Canadians, you likely didn’t read through it even though you realized it was probably a good idea to read the “fine print”.
For those that did take out your magnifying glass and dictionary in an attempt to understand the agreement between you and your credit card issuer, chances are you didn’t end up feeling all that informed.
You should not have to be a lawyer or an economist to understand the rules surrounding your credit card statement. That is why our Conservative Government gave notice last week that we are imposing greater clarity and more timely disclosure from credit card issuers when dealing with consumers.
Our NEW regulations will require clear and simple information on credit card application forms and contracts, and timely advance notice of changes to rates and fees. In short, we are also limiting credit practices that are not beneficial to consumers.
There will be a minimum 21-day grace period so that all new purchases made within that period will remain interest fee so long as the consumer pays their balance in full by the due date and regardless of an outstanding balance the month before.
We are also imposing mandatory allocations of favoured consumer payments so that you can lower your interest costs by applying payments to balances with the highest interest rates.
In addition, card issuers must receive express permission from a consumer in order to increase their credit limit. This will allow you to keep better track of your financial situation, and to have better control over your credit rating which is affected by the amount of credit available to you.
We are also restricting the debt collection practices used by credit card issuers and prohibiting them from charging over-the-limit fees arising from merchant holds place on credit cards. A hold is when you swipe your credit card in advance for a purchase, such as gasoline, and the amount registers temporarily as, for example, $100 rather than the $20 you actually spent.
And as a means to improve consumer awareness and to combat that “fine print”, credit card issuers will be required to include a summary box on all credit contracts and card applications that states information such as fees and rates.
Also required will be clear monthly explanations to consumers on how making the minimum payment and incurring compound interest will affect their balance over the long term.
And finally, we’re imposing timelier disclosure of interest rate changes. For example, if you signed up for a credit card with a low introductory rate that expires in six months, our new measure would require that the card issuer provide you with a reminder or advance notice that your interest rate is about to jump significantly.
These new consumer-friendly rules by our Conservative Government will empower Canadian consumers to shop around for the credit card best-suited to their financial needs and to make informed decisions about their family bills and spending.
For more information, go to: www.fin.gc.ca.