New credit card rules that Ottawa published on Wednesday will cost the country's banks hundreds of millions of dollars at a time when they are still recovering from the financial crisis, the industry says.
The rules are designed to give consumers more information about their credit card costs, but the banking industry argues that the added details may just add to consumer confusion.
"These are very complex regulations," said Nancy Hughes Anthony, chief executive officer of the Canadian Bankers Association. "They have given us what we consider to be fairly unreasonable time frames to implement them."
The regulations had been in the works for some time and Finance Minister Jim Flaherty said on Wednesday that the majority of them will come into force on Jan. 1. A few of them, such as a new mandatory minimum 21-day grace period, will take effect Sept. 1, 2010. (A grace period is the time between the statement date and the date that payment is due. Until now, banks and other credit card issuers set their own grace periods, generally ranging from 15 to 26 days.)
Implementing all of the new rules will cost banks hundreds of millions of dollars, and they are causing "a great amount of concern" in the industry, Ms. Hughes Anthony said.
"It's very easy for policy makers to say it would be nice to do this, it would be nice to do that," she said. "If you look at a credit card statement right now, it's already full of information that's been prescribed by government regulations."
Mr. Flaherty first unveiled the proposed rules in May, but he had not said how long he would give banks and other credit card issuers to implement them. The bulk of the rules deal with the amount and type of information that financial institutions provide to credit card users on their statements and other forms. Ottawa chose not to impose caps on the interest rates that consumers are charged on their credit card debt.
The regulations say that credit card contracts and application forms must have a summary box with information on interest rates and fees; consumers must be told how long it would take to fully repay their balance if they only make the minimum payment every month; some changes must be made to the way that consumer payments are applied to their debt (in order to reduce interest costs); and banks must tell consumers about interest rate increases before they take effect.
But roughly 70 per cent of cardholders pay off their balance every month, and the new rules will require complicated and costly changes to financial institutions' computer systems, Ms. Hughes Anthony said.Report Typo/Error