New Credit Card Rules Proposed by Federal Reserve
Credit card companies are endorsing the Federal Reserve Board's proposal to mandate better disclosure of credit card terms to consumers, apparently hoping that more disclosure will head off Congressional attempts to outlaw some of the practices consumers complain about the most.
Kathleen Day of the Washington Post has been following the dynamic between some lawmakers' attempts to prohibit some of the worst industry practices and the Federal Reserve's proposal to disclose those practices but keep them legal. As Kathleen Day's article (discussed above in Mark Anderson's May 27 post) points out, some of the worst industry practices include "universal default," in which a consumer's interest rate on all his credit cards is raised if one of his payment is late; and "risk-based pricing," in which companies reserve the right to raise a consumer's credit card interest rate at any time, for any reason.
The proposed new rules would require a 45-day notice before credit card terms could be changed, instead of the current 15 days. They would also require companies to apply consumers' payments to the debt carrying the highest interest rate, not the lowest, as many companies do now.
Consumer advocates complain that the Federal Reserve's proposed rule changes don't eliminate some of the common abusive practices that only Congress can stop; they only provide better disclosure about what those practices are.
