FACTBOX-Canada to set new credit card regulations

TORONTO, May 21 (Reuters) - Canada laid out new rules for the credit card industry on Thursday, including a standard grace period on payments and increased disclosure, but they fell short of tough regulations just introduced in the United States.

Finance Minister Jim Flaherty said the Canadian government will not move to limit interest rates on credit cards because of a belief "in consumer choice".

The government said the proposed regulations will:

- Mandate an effective minimum 21-day, interest-free grace period on all new credit card purchases when a customer pays the outstanding balance in full.

- Demand allocation of payments in favor of the consumer.

- Require express consent for credit limit increases. The rule would prohibit federally regulated financial institutions from increasing someone's credit limit unless that person explicitly agrees.

- Place limits on debt collection practices, including restrictions on the hours that a financial institution is allowed to contact a customer to collect on a debt.

- Prohibit over-the-limit fees arising solely from holds placed by merchants.

- Require card issuers to provide clear information in credit contracts and application forms through a summary box that will set out key features, such as interest rates and fees.

- Ensure consumers understand the implications of making only the minimum payment by providing information on how long it would take to fully repay the balance if only the minimum payment is made every month.

- Mandate advance disclosure of interest rate increases prior to their taking effect, even if this information had been included in the credit contract. (Compiled by Jeffrey Hodgson; editing by Rob Wilson)