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Fed Could Remake Credit Card Regulations
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Consumer advocates pointed out that card issuers will still be able to raise the rate on an existing balance if the customer is 30 days late on a payment. Furthermore, they said, the proposal does nothing to restrict banks' ability to raise rates on a customer's future balance or to exercise other punitive measures. An increase in credit card delinquencies has already led many banks to cut limits and raise rates.
"They can cut my credit line, they can freeze my credit line, they can tell me going forward that my interest rate is doubled or tripled," said Travis Plunkett, legislative director for the Consumer Federation of America.
Another concern among consumer advocates is the timeframe for implementing the changes. Card issuers have said they will need a substantial amount of time, up to a year, to change their practices. Yingling said that changing their disclosures and their computer systems takes time.
Linda Sherry, director of national priorities for Consumer Action, urged the Fed to give the banks no more than 180 days.
"That would be a big mistake if they give the card companies a couple of years to do this," she said. "In the interim period the consumers would be sitting ducks for all these bad practices."
Consumer advocates said they hope for more reforms. Although the proposal is sweeping, the advocates said it fails to ban all questionable practices, such as aggressively marketing credit cards to college students.
Several members of Congress, including Sen. Christopher J. Dodd (D-Conn.), proposed bills this year that would have gone further than the Fed's proposal. They have said they plan to do so again next year.
"I think we'd be kidding ourselves if we thought this is the final word on credit cards," said Ira Rheingold, the executive director and general counsel of the National Association of Consumer Advocates. "This is a good first step. But there's a way to go before we properly regulate credit in our society."
