From one regulator to another: Proposed credit card rules go too far

The credit card industry has been abuzz this week with talk about the propriety of one banking industry regulator essentially telling another regulatory agency to back off of efforts to add more consumer protections to credit card rules.

John Dugan, the Comptroller of the Currency, added his voice to the more than 56,000 comments submitted regarding a proposal to ban "unfair or deceptive" trade practices in the credit card industry. The Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration jointly issued the proposals in May. A Fed spokeswoman has said they expect to finalize the rules by year's end.

Dugan heads the Office of the Comptroller of the Currency (OCC), a federal agency that oversees national banks such as Bank of America (the largest U.S. credit card issuer), JPMorgan Chase and Citi.

The 12 page OCC letter  was dated Aug. 18, exactly two weeks after the filing deadline for public comments on the proposal, but the OCC may be exempt from that cut-off.

Dugan's sentiments echo those cited by banks and credit card issuers: "We believe that particular aspects of the Proposed Rule would have unintended and undesirable consequences that: (1) raise safety and soundness concerns; (2) are not necessary to assure fair treatment of consumers, and in some respects run counter to consumers' interests; and (3) could result in a significant reduction in credit availability."

Dugan supports provisions in the rules that would limit so-called fee harvester credit cards or ban double-cycle billing. But is urging the Fed to reconsider proposals to limit interest rate hikes (called re-pricing) on existing credit card balances. Dugan  also expressed concern about potential lawsuits that might result if consumers file suit over past use of practices deemed unfair or deceptive.  The comptroller also wants the Fed to back off of a provision that requires credit card issuers to wait 30 days after payment due dates before triggering interest rate hikes because of late payments. Instead of 30 days the OCC supports a five-day trigger.

 Consumers Union, the nonprofit consumer advocacy group that publishes Consumer Reports magazine, issued a statement flagged with the title "OCC sides with banks on credit card reform."

"It is outrageous that the federal regulator overseeing the banking industry is so out of step with the needs of millions of Americans unfairly trapped in debt by abusive credit card practices," writes Gail Hillebrand, senior staff attorney for Consumers Union.

The real question is how much influence the OCC will have with the Fed?

Stay tuned. 

See related: Credit Cardholders' Bill of Rights survives key vote, Fed backs rules to curb deceptive credit card practices, Fed moves to close timing loophole in credit card payments, Timing is everything for some credit card payments, Regulation Z: Fed moves to change credit card rules