Benoit: Government’s LANDMARK new credit card rules WILL protect consumers

May 26, 2009

May 26, 2009 (OTTAWA) – Leon Benoit, Member of Parliament for Vegreville-Wainwright, welcomed strong new consumer protection rules with respect to credit cards announced last week by the Conservative Government as part of Canada’s Economic Action Plan. Among the new proposed rules:

• Summary Boxes on Contracts and Applications will help improve disclosure to consumers by clearly stating key features such as interest rates and fees;
• Clearer Implications of Minimum Payments by improving consumer awareness of the time it would take to fully repay loans if only the minimum payment is made each month; and
• Timely Advance Disclosure of Interest Rate Changes to protect consumers from sudden and poorly disclosed interest rate hikes.

“Canadians shouldn’t need a magnifying glass and dictionary to read their credit card agreement or application, and they shouldn’t have to be a lawyer or economist to understand them either,” said Benoit.  “We’re forcing greater clarity and more timely disclosure from credit card issuers when dealing with consumers.”

In addition, the proposed new rules will limit other business practices not beneficial to consumers, including:

• Minimum 21 Day Grace Period: all new purchases made within that period to remain interest fee as so long as the consumer pays their balance in full by the due date;
• Lower Interest Costs with mandatory allocations of favoured consumer payments ;
• Express Consent for Credit Limit Increases;
• Limits on Debt Collection Practices; and
• Prohibit Over-The-Limit Fees by restricting fees due to merchant holds placed on credit cards, protecting consumer from inadvertent fees they are not responsible or aware of.

“We realize that businesses have legitimate concerns surrounding the practices of card issuers in areas ranging from ‘interchange’ fees, interest rates, business practices, and marketplace structure,” continues Benoit. “Parliament is formally examining these important issues, as House of Commons Standing Committees (Finance and Industry, Science and Technology jointly) and a Senate Standing Committee (Banking, Trade and Commerce) are currently holding in-depth examinations. I support these undertakings, and I know the Finance Minister is closely monitoring the proceedings and we look forward to their reports on their findings.”

Benoit also pointed out that the Competition Bureau has also launched an investigation on the competitive environment in which interchange fees are set. 

“Certainly there is more that we may be able to do, but as a result of the changes made by this Conservative government, when Canadians make the choice to use a credit card, they aren’t signing away all their rights. Our new consumer-friendly rules will empower Canadians by making it easier for them to shop around for the credit card best suited to their needs without fearing they will be taken advantage of later,” explained Benoit. “Our Government’s action is also a key step in improving financial literacy in Canada – a crucial skill in these difficult economic times.”

Backgrounder