The Federal reserve is taking public comments on proposed changes to credit card practices. It's no news to people here that credit card companies are working hard to squeeze every last dollar they can from consumers. Well, change is in the wind.
To see where and how you can go to leave a public comment, scroll to the bottom.
More than 10,000 people have already commented on the proposed changes that, among other things, would prohibit credit card companies in some instances from hitting you with a higher interest rate on debt you’ve already incurred.
Or, after you accept a "balance transfer" offer with a low interest rate, you later find that your payments go first to that cheaper debt, rather than to the higher-rate purchases you’ve made. Under the Fed’s proposal, credit card issuers would need to apply at least a portion of your monthly payment to higher-rate debt, in most cases.
The proposed rules also would prohibit "two-cycle billing," in which banks compute interest on debt on days preceding the most recent billing cycle, a practice that can result in borrowers paying interest on debt paid off during the previous month’s grace period.
Of course, the credit card companies are "deeply concerned" that the new rules would lead to reduced competition and "higher consumer prices, fewer consumer choices and reduced consumer access to credit cards," said Edward Yingling, president and chief executive of the American Bankers Association, a Washington-based trade group, in a statement released soon after the Fed’s proposal."
Of course the Fed's proposals fall short even in the areas they address. For instance, the proposal to make credit card issuers apply consumers’ payments to higher-rate debt only applies to money consumers send in above the minimum payment. And the Fed rules don’t really address fees.
There are three other proposals out there (that I know of):
Rep. Carolyn Maloney, D-N.Y., H.R. 5244, a bill that, among other things, would end "universal default" when a credit card issuer raises a consumer’s interest rate based on late mail statements 21 days before the bill is due rather than the current 14, according to Dodd’s statement.
In May 2007, Sen. Carl Levin, D-Mich., introduced S. 1395, which proposes a cap on "penalty" interest-rate hikes to no more than seven percentage points above the previous interest rate. The bill would also prohibit charging interest on fees, among other provisions.
Sen. Robert Menendez, D-N.J., introduced S. 2753 in March. Like Dodd’s proposal, the bill limits the ways in which banks offer credit to people under age 21. Also, it would prevent late-payment fees on any payment postmarked by the payment date, among other changes.
The Federal Reserve said it expects to issue a final ruling by the end of this year. It could weaken the proposed rules. Saunders said the Fed asked credit card companies whether the rules would be expensive or burdensome. That "indicates a possibility of (the Fed) weakening the rules," she said.
To comment yourself: It's on the Federal Reserve site under Consumer Information or you can take this shortcut:
federalreserve.gov
scroll down the page to "Regulation AA" and click on "submit comments"