There have been several diaries here of late concerning Citigroup and its essentially "predatory" credit card practices. Certainly Citigroup is not alone in its practices, although at the present time they may be one of the worst.
Today's news reveals new "regulation" being offered by the Federal Reserve. My first thought on reading about the regulations was: "What the hell took them so long."
Personally, I have advocated for Congress actually legislating on the issue, but first things first...
What is the news coming out of the Fed?
The new regulation is expected to:
-- Prohibit issuers from raising interest rates on existing debt except in certain circumstances, such as when promotional rates expire or when payments are at least 30 days late.
-- Require card issuers to apply monthly payments that exceed the required minimum at least partly to higher-rate card debt. Currently, most issuers apply payments first to lower-rate debt, causing consumers to pay more finance charges.
-- Bar banks from charging a late fee unless they've given borrowers a "reasonable" amount of time to pay. (The rule is expected to say that 21 days will be considered reasonable.) Some consumers complain that by the time they get their bill, they only have a few days to pay it. If they're late, they're hit with a fee of up to $39, and charged a higher interest rate.
Now, in the current credit crunch, with rising unemployment, excessive debit, and the American consumer essentially sinking while the "experts" stumble from attempting to save one industry to the next...when would this new regulation actually take effect? Hmm...Not until JULY, 2010! Wow, the Fed is really putting credit card companies on notice hey?
What I advocate is for immediate legislation that will put a Federal usury limit on credit card debt...I suggest 12% as a cap (I know this is high, but I am just trying to be reasonable in light of some companies who charge as much as 35%). I suggest that interest be assessed per annum, rather than "compound" (compound enables a credit card company to add the interest to your principal and then essentially charge interest on interest) I suggest there be no late fees or over the limit fees over the sum of $10.00. I suggest that there be no reduction in the "limit" that would cause any consumer to be "over the limit". I suggest that this legislation be enacted NOW.
An additional thought would be that any credit card company or banking industry receiving Federal taxpayer dollars charge consumers the exact amount of interest they are paying the Federal Government for their bailout money. As a debtor nation, real people should be given first priority, rather than the institutions who aided and abetted creating that debt...