The wait may be over for those pushing for tougher credit card industry regulation.
The Federal Reserve Board is meeting May 2 to vote on “proposed amendments to consumer regulations to prohibit unfair or deceptive acts or practices by banks,” according to its Web site.
There’s no word yet on exactly what the new rules will cover. The Fed has the authority under the Federal Trade Commission Act (FTC Act) to regulate unfair or deceptive trade practices related to the banking industry.
Is raising a credit card interest rate based on a late payment on another, unrelated credit account unfair?
Is hiking interest rates above the 20 percent or 30 percent APR level and applying it retroactively to previous purchases unfair?
Is allocating monthly payments to lower interest rate charges first rather than to higher rate balances deceptive?
We’ll see what the Fed governors say when the regulations come out.
Too little, too late
New York Congresswoman Carolyn Maloney, who introduced the Credit Cardholders’ Bill of Rights in February 2008, said in a press release today:
“It’s nice that the Fed has finally decided that something needs to be done to rein in credit card industry abuses, but struggling Americans can’t wait for a repeat of the regulators’ abysmal performance on subprime mortgage regulation. By the time the Fed gets around to finalizing these credit card reform proposals, they will likely be watered down and come too little too late for consumers who need relief now.”
It’s true that churning out new regulation is not a speedy process. The Fed’s proposed amendments to the Truth in Lending Act requiring clearer disclosures of terms for open-ended credit (called Regulation Z) has been languishing for nearly a year.
Sandra Braunstein, the director of the Fed’s division of Consumer and Community Affairs testified April 17 before a congressional hearing and said the FTC ACT and Reg Z amendments would be finalized “by the end of the year.”
Maloney said she’s not holding her breath waiting for timely, effective action from the Fed and urged her colleagues in Congress to act quickly with legislation.
It appears her U.S. Senate colleagues are listening. Yet another credit card bill is scheduled to be introduced tomorrow by Democratic senators Chris Dodd of Connecticut and Carl Levin of Michigan. Their legislation — called the Credit Card Accountability, Responsibility and Disclosure Act or CARD Act — will target “credit card billing, marketing and disclosure practices.”
Levin and Dodd will be joined by representatives from several consumer groups and Harvard University law professor Elizabeth Warren, a recognized expert on credit and bankruptcy, when they introduce the bill.
‘Waiting is not an option’
Says Maloney: “We can’t wait to act. More and more Americans are turning to their credit cards to help pay bills, buy groceries and make ends meet in this troubled economy. Congress can and should take swift action to reform major credit card abuses.”
Reality check: Congress is no cake walk either. Bills must be passed by the House and Senate and signed by the president. That won’t happen overnight, either.