UPDATE 3-US credit card rule changes approved by regulator

(Adds Schumer, Maloney, Consumers Union comments, data)

By John Poirier and Karey Wutkowski

WASHINGTON, Dec 18 (Reuters) - Rules aimed at preventing credit card holders from being hit by unfair and deceptive practices such as surprise fees and interest-rate hikes were approved on Thursday by a U.S. banking regulator.

The new regulations are expected to bring some relief to millions of card users by restricting issuers' ability to raise rates and by giving holders reasonable time to pay their balances. They also are expected to lower revenues for issuers.

The Federal Reserve Board and the National Credit Union Administration are expected to approve the regulations later on Thursday. The new rules go into effect July 1, 2010.

Office of Thrift Supervision Director John Reich, whose agency approved the regulations, said in a statement they will "ensure fair treatment" for millions of American cards users.

"The rule will enhance public confidence in financial institutions," Reich said.

In 2007, Americans used an estimated 694.4 million credit cards with Visa (V.N), MasterCard (MA.N), American Express (AXP.N) and Discover (DFS.N) logos, according to the Card Industry Directory.

Citigroup (C.N), Bank of America (BAC.N) and JPMorgan Chase (JPM.N) enjoyed almost 70 percent of the credit card market at the end of 2007, according to the directory.

The American Bankers Association, which represents the biggest card issuers, called the rules unprecedented.

"The new regulations will fundamentally alter the relationship that cardholders have with their banks and the way that banks communicate with cardholders," ABA President Edward Yingling said in a statement.

Scott Talbott, chief of government affairs for the Financial Services Roundtable, said the rules will likely result in less credit as banks won't be as able to charge higher interest rates to riskier borrowers.

"You need to be able to reprice for that risk, otherwise banks will grant less credit," Talbott said. "You will have those who manage credit properly subsidizing those who don't."

18-MONTH DELAY, MORE NEEDS TO BE DONE

The rules aim to address several issues consumer groups and U.S. lawmakers have complained about for years. Among them, the rules prohibit raising the annual percentage rate (APR) on existing balances except under certain circumstances, such as a payment being more than 30 days late.

Consumer groups said the new protections will restore "some basic fairness" to consumers. "But we're not going to get these protections for another year and a half," said Gail Hillebrand with Consumers Union in San Francisco.