Posted by: kvan in regulation, payments, late fee, fee, Federal Reserve, double-cycle, debt, credit card, congress, balance on Dec 19, 2008
New rules are on the way to regulate credit card issuers. While the House of Representatives shaped a new bill to reign in issuers (see Credit Cardholders' Bill of Rights), the Senate ran out of time and failed to address it. The Federal Reserve, on a parallel track, has devised a set of rule changes in the same spirit as the Bill that stalled in the Senate. On the down side, the rules don't take effect until July, 2010, giving issuers another year and a half to bleed consumers under the current lax regulations.
The common thread between the two initiatives is broad consensus that issuers have spiraled out of control over the last few years in their exploitation of consumers. Referring to the Fed actions, Sen. Carl Levin, D-Mich., said the new rules "are a good first step, but they don't prevent a number of unfair, deceptive and predatory practices that saddle many American families with crushing debt."
The new rules prohibit a number of practices, including:
-Placing unfair time constraints on payments. A payment could not be deemed late unless the borrower is given a reasonable period of time, such as 21 days, to pay.
-Placing too-high fees for exceeding the credit limit solely because of a hold placed on the account.
-Unfairly computing balances in a computing tactic known as double-cycle billing.
-Unfairly adding security deposits and fees for issuing credit or making it available.
-Making deceptive offers of credit.
Congress will likely re-initiate their efforts when the new term opens in January. The main sponsor of last year's bill, Rep. Carolyn Maloney (D-NY), says on her web site that the new Fed rules are a good first step, but take too long to implement and don't go far enough. To be sure, the congressional version of these rules does go further in protecting consumers. Too far, some say. Personally, I consider myself a fairly knowledgeable consumer acting in good faith, and yet I repeatedly get bitten by these schemes. I've grown tired of it, and so I am in favor of the more stringent rules in the congressional bill.