Canada announces new credit card rules

Thu May 21, 2009 4:19pm EDT
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By Ka Yan Ng and Julie Gordon

TORONTO (Reuters) - Credit card issuers in Canada will have to provide a standard 21-day grace period on payments for new purchases under regulations being introduced by Ottawa, but the rules fall short of tough new U.S. regulations.

The new Canadian regulations -- part of an eight-point action plan -- are also designed to improve the financial literacy of the public, Finance Minister Jim Flaherty said on Thursday.

The 21-day grace period regulation was met with some resistance by financial institutions, Flaherty said.

Some card issuers were charging interest on new purchases during their grace periods when the cardholder did not pay in full their balance for the preceding month, he said.

The new rule proposes to provide an interest-free period to all new purchases when cardholders pay in full in the current month, regardless of outstanding balances the month before.

"It is a major change. It will cost financial institutions

tens of millions of dollars," Flaherty said.

Other rules include a requirement for improved disclosure on credit card contracts, advance notice of changes in interest rates, and the prohibition of certain debt collection practices.   Continued...

<p>Canadian Finance Minister Jim Flaherty announces new credit card rules at a news conference in Toronto, May 21, 2009. REUTERS/Peter Jones</p>