Credit Card Companies In The Cross Hairs Of Congress Aggressive legislation by the Federal Reserve, and supported by Congress aimed at the credit card industry, is currently in the works. The goal is to get unfair practices under control and force the industry to be more consumer friendly. The substantial and uncontrolled increases in terms, interest rates and fees need to be regulated, as reported at washingtonpost.com. (See front page story) The proposed legislation (see summary below) includes a crackdown on practices such as charging interest on debt that has been repaid and assessing late fees when consumers are not given a reasonable amount of time to make a payment. When different interest rates apply to different balances on one card, companies would be prohibited from applying a payment first to the balance with the lowest rate. This is the case for the “teaser” offers where your card will offer you credit at 2.99%, but for only the first 3 months. Then rates move to the average rate being charged, around 18%. Marketing practices would also be changed where companies cannot target those under 18 years of age. In the past, credit card companies have been forced to give a more detailed description of their terms and conditions, but it hasn’t been enough. Two additional bills have been introduced encouraging the same regulation of credit card company practices. Representative Carolyn Maloney introduced the Credit Cardholders Bill of Rights Act of 2008 (See previous E-ALERT coverage) aimed at unfair regulations. Congress needs to take up the issue now rather than wait for the Federal Reserve to create rules that can be too easily changed. Representative Maloney already has 110 co-sponsors on her bill in the House, but the measure is stuck in the Financial Services Committee. Another piece of legislation, developed by Christopher Dodd (Senate Banking Committee chairman) requires that a 45 day notice be given to customers in the event of interest rate increases. (See Summary Below) One of the most widely scorned actions by credit card companies is their ability (found in the fine print) to increase interest rates on balances a card holder already has. The powerful American Banking Association has said it plans to fight the new rules as a regulatory intrusion into the market and warned that eventually it could be the consumers who lose because of the changes. The group said generous offers like balance transfers could be limited or even wiped out. We here at the Club are confident the credit card companies will find more ways to enact pain on the general public.
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