Fed Proposes New Rules
for Distributing Credit Cards

The Federal Reserve Board has proposed to modify its rules that limit the distribution of unsolicited credit cards. As part of its revised commentary to Regulation Z (Truth in Lending Act), the Fed backed away from its "one-for-one" rule which prohibited lenders from issuing more than one renewal or substitute card to customers. Under the new rule, issuers would be able to issue multiple cards. This should accelerate the distribution of odd-sized cards such as the products recently offered by Discover and Bank of America. Some of these new "outside-the-wallet" cards are designed to fit on key chains, to present a more accessible option for paying with plastic. Under the new rules, issuers could distribute both a standard wallet-size version of the card and one or more novelty-shaped versions to the same cardholder.

Consumer activists have long opposed the distribution of multiple or unsolicited credit cards, and will likely express some concerns over the proposed rule. The Fed expects to issue its final interpretation in March. Changes would take effect in October 2003.