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News & Current Events Discuss Fed pushes aggressive credit-card protections at the General Forum; WASHINGTON — The Federal Reserve Board moved Friday to end "unfair and deceptive" credit-card-industry practices assailing consumers who are already ...

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Old 05-03-2008, 07:35 PM
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Post Fed pushes aggressive credit-card protections

WASHINGTON — The Federal Reserve Board moved Friday to end "unfair and deceptive" credit-card-industry practices assailing consumers who are already struggling to cope in a bad economy.

If approved, the regulations would be the biggest clampdown on the industry in decades, aiming at protecting people from credit-card companies that arbitrarily raise interest rates or don't give borrowers adequate time to pay their bills.

"The proposed rules are intended to establish a new baseline for fairness in how credit-card plans operate," Federal Reserve Chairman Ben Bernanke said. "Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs."

The banking industry promised a fight, saying the regulations would hurt consumers.

"The Federal Reserve's proposal is an unprecedented regulatory intrusion into marketplace pricing and product offerings," said Edward Yingling, president and chief executive of the American Banking Association. "We are deeply concerned that these rules will result in less competition, higher consumer prices, fewer consumer choices and reduced consumer access to credit cards. In short, everyday consumers will bear the real cost of these proposals."

The Federal Reserve Board said its new rules are part of an effort "to enhance protections for consumers who use credit cards." Its get-tough stance comes after the Fed was sharply criticized for not acting quickly enough in the face of a burgeoning mortgage crisis that has seen foreclosures skyrocket, home sales and prices plummet, and new-home construction falter.

"These steps are a significant improvement," said Sen. Charles Schumer, D-N.Y., a member of the Banking Committee and a leader in legislative efforts to make credit-card companies more forthcoming about the interest rates they charge. "While they can still go further, the Fed deserves credit for acting, particularly for banning some awful practices rather than relying solely on disclosure."

Tighter interest controls

The new rules would prohibit lenders from arbitrarily raising interest rates on any debt unless a promotional rate expires or the borrower was more than a month late in making a payment.

Payments also no longer could be classified as late if borrowers didn't receive their statements at least 21 days in advance of the due date.

The rules also would stop the practice of "double-cycle billing," in which lenders calculate one month of fees based on two months' worth of activity on an account, and would impose restrictions on how lenders compute balances.

Lenders also would be prohibited from allocating payments among balances with different interest rates in a way that benefits only lenders. That means lenders no longer could apply an entire payment only to the balance with the lowest rate, as lenders frequently do with so-called "zero-interest" balance transfers, leaving balances with higher interest rates to grow. Instead, lenders would be required to divide payments in a way that gives consumers the full benefit of any discounted rates.

The Fed said the new regulations could be finalized by Jan. 1.

The credit-card industry has been under attack on Capitol Hill since Democrats took control of Congress last year. The industry once faced greater controls, but when interest rates skyrocketed in the late 1970s, banks complained that the controls were hurting profits and reducing credit, and the regulations were eliminated. The result has been an industry that critics say has taken advantage of low-income and middle-class Americans, who increasingly are turning to credit cards to pay for living expenses.

"Credit-card industry abuses have become more pronounced in this troubled economy as more families turn to their credit cards to help pay bills, buy groceries and make ends meet," said Rep. Carolyn Maloney, D-N.Y., chairwoman of the House Financial Institutions and Consumer Credit subcommittee.
Nation & World | Fed pushes aggressive credit-card protections | Seattle Times Newspaper
Credit Card Companies:
We won't be able to charge 30+% interest rates because you're late on one payment, and that will hurt consumers that don't pay us extra $$$$



I hope they get byatch-slapped.
If a person does not have responsibility to have a credit card, they should not get a credit card.
Credit card companies LOVE to give cards to people they have no idea if they are responsible enough, burdening them with credit card debt, and then jack up everybody's interest to cover the difference.

It's time they started acting responsibly!
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Old 05-03-2008, 08:38 PM
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Default Re: Fed pushes aggressive credit-card protections

I'm still waiting for them to crack down on "payday loan" companies
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Old 05-04-2008, 01:47 AM
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Default Re: Fed pushes aggressive credit-card protections

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Originally Posted by saltwn View Post
I'm still waiting for them to crack down on "payday loan" companies
Yup...

My sister told me of one where you ended up paying 99.94% of your loan...
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Old 05-06-2008, 01:33 PM
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Default Re: Fed pushes aggressive credit-card protections

Some of these credit card practices amount to loan sharking by the time they are done. I have a friend who was given a card at 17 and, of course, she maxed out the limit which they, in turn, increased in less than 6 months. She missed one payment after having the card for 3 years and they jacked her credit limit up to a point that she was unable to make the payments.

I ended up having to loan her the money to pay off the credit card and she payed me back, paying off the entire debt in less than 6 months. If she had been paying the credit company, she would have been paying for 8 years by my calculation.

It's insane that the credit card companies change the terms of the loan with impunity.
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Old 05-06-2008, 05:01 PM
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Default Re: Fed pushes aggressive credit-card protections

Quote:

The new rules would prohibit lenders from arbitrarily raising interest rates on any debt unless a promotional rate expires or the borrower was more than a month late in making a payment.

Payments also no longer could be classified as late if borrowers didn't receive their statements at least 21 days in advance of the due date.

The rules also would stop the practice of "double-cycle billing," in which lenders calculate one month of fees based on two months' worth of activity on an account, and would impose restrictions on how lenders compute balances.

Lenders also would be prohibited from allocating payments among balances with different interest rates in a way that benefits only lenders. That means lenders no longer could apply an entire payment only to the balance with the lowest rate, as lenders frequently do with so-called "zero-interest" balance transfers, leaving balances with higher interest rates to grow. Instead, lenders would be required to divide payments in a way that gives consumers the full benefit of any discounted rates.
There isn't one thing in here that smacks of anything other than reputable business practice.

The government SHOULD be regulating that which is unconscionable - isn't that what laws are FOR?
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Old 05-06-2008, 05:31 PM
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Post Re: Fed pushes aggressive credit-card protections

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Originally Posted by tristanrobin View Post
There isn't one thing in here that smacks of anything other than reputable business practice.
The government SHOULD be regulating that which is unconscionable - isn't that what laws are FOR?
I think one of the main reasons it hasn't been dealt with until now is because of credit card company lobbyists.

And one of the reasons it is being dealt with now (according to the article) is because Democrats are tackling the issue.
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