Federal Reserve tightens credit reform loopholes

Federal Reserve tightens credit reform loopholesCredit card reform has been working in the favor of those with bad credit history, however, some companies have found – and taken advantage of – the loopholes in the system. Luckily, the Federal Reserve has taken note of the practices and recently approved motions to tighten the current regulations, according to the Associated Press.

Effective October 1, credit card companies will be required to take into account whether the consumer will be able to repay the debt before they approve additional lines of credit. Currently, banks look at household income to make this determination, but the amendments take away this right, claiming it is not an accurate reflection of one's repayment ability.

Additionally, card issuers will be prohibited from raising or taking away promotional interest rates or waivers, provided that the account is not considered delinquent for more than 60 days, according to the news source. Also, during the first year of a new line of credit, fees and charges are "capped at 25 percent of the credit line," while subsequent years have no cap, reports the AP.