According to consumer advocates, members of Congress and banking officials, it appears that stricter regulation of the credit card industry will be approved by the end of the year. The comment period on the Federal Reserve’s proposed actions closed in early August. By then nearly 56,000 comments had come in via e-mail and regular mail, a record response for any Fed proposal. Finally, both the Fed and Congress are working to tighten rules on the credit card industry. The large response to the Fed’s proposal came on the heels of congressional action on the issue. The House Financial Services Committee moved Rep. Carolyn B. Maloney’s Credit Cardholders’ Bill of Rights out of committee on July 31st. The measure would prohibit unexpected increases in the rates charged on pre-existing credit card balances, among other things. Observers said the New York Democrat’s bill probably wouldn’t pass the Senate this year because time is running out.
Nonetheless, the fact that the bill made it out of committee despite significant pushback from the banking industry and top Republican lawmakers sends a signal to the Fed that if it doesn’t take action, Congress eventually will, if not this year then during 2009. Several similar bills in the House and Senate have added to the momentum for change. Travis Plunkett, legislative director of the Consumer Federation of America, believes that the Fed will have to act because of the congressional pressure.
The Fed’s proposed rules would, among other things, specify when credit card issuers can increase interest rates on existing balances, keep them from calculating finance charges based on the average of balances over two cycles even if part of the debt has been repaid, and prohibit late fees on customers who were not given a reasonable amount of time to pay.
The proposal also seeks to regulate overdraft protection on deposit accounts, requiring banks to let customers opt out of the service before assessing fees. But the proposal does not, in all cases, ban the so-called universal default — that is, raising a person’s interest rate if he or she is late on an unrelated debt. It also does not address many arbitrarily high credit card fees.
A much tougher approach is needed to guard against what they call “unfair or deceptive practices,” by the credit card companies. Consumer groups and key members of Congress believe the Fed’s current proposal still falls short. Even if none of the bills pass this year, lawmakers and consumer advocates expect Congress to take up the matter again early next year. If Senator Barack Obama wins the presidential election the chances for reform will increase significantly.
Source: Washington Post
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