The Fed Takes Aim At The Credit Card Industry
While tactics of credit card companies are often considered predatory at the very least, Uncle Sam has announced on Friday that things are about to improve for the little guy if their proposals are put into action. The Federal Reserve and other regulators have begun a crack down on unfair and deceptive practices that currently reign supreme in the credit card industry that have added billions of dollars of debt to individuals already struggling to cope with poor economic conditions.
In the most wide spread governmental crackdown on the credit card industry in decades, the Fed, in conjunction with the National Credit Union Administration and the Office of Thrift Supervision, is proposing a regulation that would, in its simplest form, put an end to the credit card company’s ability to unfairly raise interest rates. In addition these regulations would make certain card issuers give people enough time to pay their bills. Naturally, the banking industry is expected to fight these new rules.
So exactly what is the Fed proposing? The new rules would prohibit the following:
Unfairly allocating payments among balances with different interest rates.
Unfairly raising annual percentage rates on outstanding balances.
Unfairly adding security deposits and fees for issuing credit or making credit available.
Unfairly computing balances.
Placing unfair time constraints on payments.
Placing too-high fees for exceeding the credit limit solely because of a hold placed on the account.
Making deceptive offers of credit.
Representatives from the American Bankers Association have already announced plans of fighting these new proposals under the defense that such regulation does not allow the lender to base pricing on the risk of the individual borrower. In other words, if high-risk borrowers aren’t forced to incur higher interest rates, the burden is then spread evenly to customers in good credit standing.
With modest estimates claiming credit card debt to the tune of $850 billion it’s no wonder the Fed has taken note. What’s worse is that households that don’t pay their credit card bills in full every month owe an average of $17,000. The American mentality of charge now/ worry later has finally been catching up to many individuals on account of recent economic turmoil. For many, it looks like the time to worry is now and hopefully the Fed’s plan of attack isn’t too little too late.
