The Federal Reserve, the New Card-Zar?

September 29, 2009 | by Brian Robertson	0 comments

According to the AP News Release,

Fed moves ahead on credit card protection plan

By JEANNINE AVERSA (AP)

WASHINGTON - The Federal Reserve proposed rules Tuesday to better protect Americans from sudden hikes in interest rates on credit cards.

The proposal would generally bar rate increases during the first year after an account is opened.
It also would ban - with a few exceptions increasing the rate on existing credit card balances. For instance, if a customer is behind more than 60 days on a payment, the rate on the existing balance can be boosted.

"This proposal is another step forward in the Federal Reserve's efforts to ensure that consumers who rely on credit cards are treated fairly," said Fed member Elizabeth Duke, the point person on the effort.

The proposal also would require credit card companies to obtain a customer's consent before charging fees or transactions that exceed their credit limit, and would forbid companies from issuing credit cards to people under the age of 21 unless they have the ability to make the required payments or a parent or other co-signer.

The Fed is required to take the action under legislation passed by Congress and signed into law by President Barack Obama in May.

The public, industry and other interested parties will have an opportunity to weigh in on the Fed's proposal. The provisions are slated to take effect on Feb. 22, 2010.

Copyright © 2009 The Associated Press. All rights reserved.

Commentary:

This comes right after The House Financial Services Committee held a press conference last Thursday, Sept 24th to push for a December implementation of the Credit Card Act's provision from the original February date. Part of the act was enacted in August which requires banks to allow more time for customers to pay their bills and stricter requirements for banks to notify customers of contract changes. Several items, however, we not implemented such as stopping credit-card companies from raising rates. Also, the new rules would require consumer's consent for creditors could charge fees for transactions beyond the card's credit limit. This meeting emerged after the aggressive move from credit-card companies hiking fees and interest rates after realizing they only had a few months left under current regulations. It is also important to note that with the holiday spending season quickly approaching this could be a needed boost for consumer sentiment.

Perhaps the government should get in the credit card business and offer a competitive credit card to bring down those fees, but then again the net cost of the program would likely exceed any savings to consumers.

Tags	brian-robertson, credit-card, creditors, fees, interest-rates, lenders
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