New credit card regulations aimed at protecting Canadians went into force on Wednesday.
Jim Flaherty, the Minister of Finance was quoted in the official press release, “Our Government has taken action to make financial products more transparent for consumers. The regulations that take effect today will protect Canadians and their families from unexpected costs and provide clear information to help them make better financial decisions.”
The new regulations aim to make financial products more transparent, and include the following mandates:
- Minimum 21 day interest free grace period on all new credit card purchases
- Payments above the minimum amount due must be applied to balances with the highest interest rates. This effectively lowers interest costs to borrowers.
- Statement information must include the time it will take borrowers to pay off the balance if only paying the minimum amount due.
- Advanced disclosure of interest rate increases must take place prior to their taking effect
It remains to be seen if these regulations have unintended consequences. The United States 2009 CARD Act mandates similar regulations, and many US consumers have seen interest rate rises and higher annual fees. Credit card companies have shareholders and analysts to impress, so any reductions in revenue associated with these regulations may arise in other forms.
