New government proposals could help consumers with credit card debt

The Federal Reserve has proposed new rules that could help consumers who are struggling to pay down credit card debt.

According to the Fed's announcement, the new proposal would mostly prohibit rate increases for the first year that an account is opened or for existing credit card balances. Creditors would also be prohibited from issuing new accounts to people under age 21 unless that person can demonstrate an ability to pay their balance or can obtain permission from a financially solvent parent or guardian.

Other provisions would limit the fees that can be associated with subprime credit cards, ban two-cycle billing and other tactics that maximize interest costs, and require customer permission before imposing fees on transactions over the credit limit.

"This proposal is another step forward in the Federal Reserve's efforts to ensure that consumers who rely on credit cards are treated fairly. The rule bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts," said Federal Reserve Governor Elizabeth Duke.

The proposals also mirror a number of reforms approved by Congress that will take effect in early 2010, which will further help those struggling with credit card debt.