MasterCard Tightens Secured-Card Rules
NEW YORK -- MasterCard International unveiled new rules on Tuesday governing programs that let banks provide consumers with credit cards in exchange for security deposits.
The wide-ranging rules, which take effect Aug. 1, are the latest attempts to get closer supervision of third-party marketers by member banks. Known as independent service organizations, the third-party firms offer retailers and banks a variety of credit card programs; for a long time, they operated free of rules and regulations.
While many secured-card programs are legitimate, some mislead consumers and misrepresent the MasterCard name, the New York-based card association said.
The policy statements made by MasterCard last year become official under the new regulations. They require member banks operating a MasterCard secured-card program to register it with the association by Sept. 1. Banks intending to participate must first gain approval from MasterCard.
To eliminate deceptive advertising, MasterCard will require all solicitations, applications, and advertisements for secured cards to explain clearly how the programs work. Promotional materials must specify the credit lines that consumers will receive in exchange for security deposits, and list any related fees.
MasterCard will require secured-card solicitations to "clearly and conspicuously disclose the name and address of the member that issues or will issue the card." New rules also govern use of 900 or "pay-per-call" telephone numbers to solicit secured-card accounts.