May 3, 2008 10:00 am US/Pacific
Fed OKs Crackdown On 'Deceptive' Credit Cards
NEW YORK (CBS) ―
Paying with plastic may soon get a whole lot less stressful. On Friday, the federal government launched a credit card crackdown on unfair and deceptive practices that are costing Americans millions of dollars.
It's the biggest assault on the credit card industry in decades -- and it's about time say cash-strapped consumers, CBS station WCBS-TV in New York reports.
"I think the government should step in and I think that everybody who has a credit card should crack down on the companies too," consumer Seth Baumrin said.
"I think they should put a cap on the rates that people pay on the interest," another New Yorker added.
The Federal Reserve is proposing tougher rules to stop credit card deception and abuse by unfairly raising interest rates and not giving people enough time to pay their bills. Lawmakers say practices like these have added mountains of debt to Americans already struggling with the weak economy.
"Finally, the regulators are responding to what is a growing consumer outcry," Consumer Union senior policy analyst Jeannine Kenney said. "These practices have always been unfair but they are becoming particularly painful today."
It's estimated that households that carry a balance on their credit cards every month owe on average $17,000.
The proposed new rules that would prohibit:
• Placing unfair time constraints on payments. A payment could not be deemed late unless the borrower is given a reasonable period of time, such as 21 days, to pay
• Unfairly allocating payments among balances with different interest rates
• Unfairly raising annual percentage rates on outstanding balances
• Placing too-high fees for exceeding the credit limit solely because of a hold placed on the account
• Unfairly computing balances
• Unfairly adding security deposits and fees for issuing credit or making credit available
• Making deceptive offers of credit
"The regulators realizing they did not act quickly enough with the subprime crisis are trying to forestall an even greater crisis here in the unsecured credit market," Kenney said.
Banks and credit card issuers are already vowing to fight these changes to regulation, but Congress has its own version of bills in process, and that legislation is going after high interest rates.
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