An example that came up in our recent rulemaking was the allocation of payments by credit card issuers. As creditors began offering different interest rates for purchases, cash advances, and balance transfers, they were also able to increase their revenues through their policies for allocating consumer payments. For example, a consumer might be charged 12 percent on purchases but 20 percent for cash advances.
Under the old rules, if the consumer made a payment greater than the minimum required payment, most creditors would apply the payment to the purchase balance, the portion with the lower rate, thus extending the period that the consumer would be paying the higher rate.