Huge Public Response Shows Need for Federal Reserve Board to Adopt Strong Credit Protections Quickly

Angry consumers have deluged the Federal Reserve Board’s public comment system with more than 12,000 personal pleas for reform since banking regulators invited comments on a proposed new rule to curb unfair and deceptive credit card charges. In addition, about 19,000 more Americans have sent form letters urging action since banking regulators proposed the rules on May 2, 2008.

The deadline for public comments on the proposal is August 4, 2008.

“The massive response in favor of these reforms shows that Americans are fed up with the many traps and tricks that card companies use to drive up the amount of debt consumers owe,” said Travis B. Plunkett, legislative director of the Consumer Federation of America. “We urge the Federal Reserve Board to take heed of this overwhelming public reaction by finalizing strong rules to curb credit card abuses by the end of the year.”

The proposed rules will curb a number of unfair practices, including:

· Costly and Unjustified Interest Rate Increases. Credit card companies could no longer charge higher interest rates on balances incurred before a rate increase went into effect, unless the cardholder is more than 30 days late in paying his or her credit card bill.

· Hidden Payment Allocation Methods that Cause Debt to Escalate. Card issuers would be required to more fairly apply the payments that cardholders make to balances with different interest rates. When consumers transfer balances with low, short-term “teaser” rates (that have higher rates for new purchases), issuers would be required to apply payments first to higher rate debt.

· Interest Charges on Paid Debt. Companies could not use “double cycle billing,” which requires cardholders to pay interest on debts paid off the previous month during the grace period.

“The time for Americans to act is now if they want their credit card company to treat them
better,” said Plunkett. “Consumers have about two weeks to make their voices heard.”

Source: Consumer Federation of America

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