Fed Cracks Down On "Unfair" Credit Cards

Politicians Praise Biggest Industry Clampdown In Decades, Others Wonder If It Goes Far Enough

(CBS/AP)  Credit card companies also target younger borrowers who don’t understand how credit cards work. "A lot of parents are concerned, for example, about the kind of credit that's being offered their children at college," Plunkett told Koeppen. "Young people don't quite understand how debt works in many cases. Credit card companies are pushing a lot of debt at people often as young as 18, and we would like to reign in some of these reckless lending practices to young people and other vulnerable populations."

Among the banking practices that are not dealt with by the proposed new regulations are one-off fees, such as for the person whose payment arrives a day late. "Yes, they should pay a little extra," Plunkett said, "But they're hit with a $40-45 late fee. That strikes a lot of folks as out of proportion to the mistake they've made."

Ken Clayton, senior vice president of card policy for the American Bankers Association, described the proposed changes as "aggressive regulatory intervention in the marketplace that will result in higher prices and less consumer credit."

"If card companies cannot fully reflect risk, then millions of consumers with good credit histories will end up with higher rates," the ABA's president and CEO, Edward L. Yingling, said in a statement.

Plunkett doesn’t believe the banking industry's claims that the new rules will prevent them from taking on poor credit risks. "We don't see anything in this proposal that would stop the credit card companies from looking at the financial risk of somebody they're loaning money to, [that] wouldn't stop them from being careful," Plunkett said. "It wouldn't stop them from offering an initial interest rate that's a little higher for somebody that's a little riskier. There are many ways credit card companies are going to be able to account for the financial risk of the people they're loaning money to.

"It's unfortunate that the industry continues to buck the immense groundswell of support that is building for credit card reform," said Rep. Carolyn Maloney, D-N.Y., who has introduced consumer protection legislation in the House. She said the Fed endorsement of provisions in her bill "puts to rest the credit card companies' assertion that reform will somehow harm consumers or the economy."

The Consumer Federation of America estimates that credit card debt held by consumers is about $850 billion, some four times what it was in 1990. The group says the average debt for those 58 percent of card-holding households that do not pay their balance in full every month is about $17,000.

But the CFA and other consumer groups also complained that the "opt-out" proposals for overdraft plans were insufficient and there should be an affirmative "opt-in" right for such plans. Banks routinely allow consumers to overdraw their accounts and then charge overdraft fees, the groups said.

The Fed is acting in conjunction with the National Credit Union Administration and the Office of Thrift Supervision.

[keithle1]

Women love using plastic. Anything to avoid using dirty cash. Eeeeeeewwwww. They live to shop. Always new clothes, shoes, handbags, lingerie, perfume, jewelry, makeup, etc, to buy not to mention hairdressers, spa visits & nail salons. It never ends with women. They want to look like Beyonce on $60,000
a year.

The Mafia has a lot to learn from credit card companies. Amazing what they get away with. Pay in cash. Screw them.

[indianmade1]

Credit card companies are not the only ones taking advantage of people. Banks charge non-sufficent fund (NSF)fees on accounts at outragious rates. You can deposit a check in your account, but you can''t touch the money for at least 24 hours, longer if it''s a weekend. However, anyone else can present a check or hold on your account and get your money immediately. Why can''t the bank use the same express checking system to credit your account that businesses can use to debit your account. Credit card companies are not nearly as bad as banks, you expect the credit card companies to rob you blind, but the bank is suppose to protect your money. Ha, the bank keeps their hand in your cookie jar, and takes as much as they want when they want, and all you can do is change banks. That''s if you can find one who hasn''t "heard" about you from the other banks.

[mjvw2]

you mean you have to pay for stuff you buy on credit. What a krock!

[cnutter2]

When my 19 yr old son graduated from High School last year, he made a mistake on his checking account with his debit card. That mistake cost him over $500.00 in NSF fees. He has had a hard time understanding how to use the card... It started out with a debit under $5.00. I think the banks suck. They totally took advantage of him.....

[lochlan-2009]

"The Federal Reserve and other regulators initiated steps Friday to end "unfair and deceptive" credit card industry practices assailing consumers"

So they just allowed it to go on until now?!!!!

[forthepeopl1]

we the people can STOP all in CONGRESS and the WHITEHOUSE with something so easy, and we would not have to fire a shot at anyone to have this REVOLUTION, THATS RIGHT A REVOLUTION IS WHAT IS NEEDED TO STOP THEM ALL IN THEIR TRACKS.

HOW. WE THE PEOPLE DONT WORK OR DO ANYTHING FOR A FEW WEEKS, SEE HOW FAST THEY START DOING SOMETHING FOR AMERICANS, WHEN NO MONEY IS GOING ONTO THE GOVERNEMNT FOR A FEW WEEKS, SEE NO FOOD BEING DRIVEN TO STORES, THIS IS THE ONLY WAY WE AS AMERICANS CAN TAKE OUR COUNTRY BACK.. SO AMERICANS BETTER WAKE UP AND LETS START A COMPLETE BOY-COTT OF WORK..THIS WILL ONLY WORK IF ALL DO IT.

[e-mail]

[oscarez]

"Lawmakers who have demanded tougher controls on the credit card industry were generally positive about the proposed rules, as were consumer groups."

Bush tells the FED; "Throw the fools a bone maybe they will stop complaning". Don''t hold your breath waiting for the Bush administration to implement these new rules.

[nonayabiness]

I hope this doesn''t go the way of the oil company and mortgage company investigations. Apparently nothing came of them.

[nonayabiness]

Another tactic they use is to change the payment address without making it clearly visible to the consumer. The reason for this is, if you do online banking with your bank, to get the consumer to send the payment to the old address, which then has to be sent to the new address, wasting time and causing payments to be late. Beware.

[ahrats]

It''s about time for the government to regulate the credit card industires. They use decepive practiices to get you to take their card then screw with late fees by sending the bill out after the due date or not sending a bill out at all. Oh yea you can pay over the phone with $25-$45 surcharge vs a 41 cent stamp. Of course the low introductory rate 9-10 per cent goes to over 30% after 60 days no matter if your an on time payer or not. Banks are just trying to get their mony back on all the bad loans they made in the housing market. The govenerment has alrady bailed them out but still screws the consumer. If govenrment wants us to send money do not over charge us for doing so. I usually deal in cash not creit cards but you can not rent a car without a credit card.

[standlee5]

I''d think the banking industry should show a little humility after the massive bail outs they''re getting and the outrageous practices in which they''ve engaged. Congress should nail the the bloody bazterds but.... they won''t.

[standlee5]

It''s about time they did SOMETHING! bunch of impotent lazy corrupt bazterds.

[cyberus-2009]

----
Placing unfair time constraints on payments. A payment could not be deemed late unless the borrower is given a reasonable period of time, such as 21 days, to pay;
----

ROFL! Boy is this one going to be easy to bypass by the CC companies.

Run (and date) all the bills on friday, by the time the envelope is stuffed and ready for the post office it will be monday before they are mailed they''ve already screwed you out of 4 days, by the time you get it its been 7-10 days since the "billing date" and what are the odds going to be that the "due date" will be on a weekend day so that you have to have the payment in the thursday before to be credited, if you are lucky that is?

Banks and CC companies have been making HUGE profits on these interest and penalty scams for YEARS, minor tweaks aren''t going to stop them now.

[greeneyes222]

As a friend of mine who works for one of these banks keeps telling me, "the banker is not your friend."

Credit cards have been the second frontier of predatory lending. Sure you have a contract, and sure you pay on time, but guess what - they can change the contract unilaterally whenever they want. It''s appalling they''ve managed to get by with it so long.

It''s a shame it takes action by the Fed to protect consumers this way, but it''s good they went ahead and did it. Much more of these greedy suckers and the whole financial system is likely to collapse under the weight of their greed - banks worked hard to regain public trust after the great depression; they seem intent on violating that trust today.

[trillion1]

Election year show boating. They green lighted these abuses in the first place for the banking lobby.

[jjp735i]

The Feds are all talk just like Congress is and in the end will give in to the lobbist of the banking industry. Any help we get will be small and favor the banking industry.

[cowboy9994]

Mark Longshore says its about time. Half the time the interest rate increase is what puts people into BK and then no one wins.

[apprxam]

The Fed Res isn''t doing a *** thing about credit cards because they deal with money and the debt isn''t money. They''ll investigate, maybe even shut down the activities of a bank or two, but it''ll be turn over on appeal by the federal courts and eventually the Supreme Court because congress never authorized the fed feigned authority. Remember, the Treasury Secretary gave the green light not congress. When Bush leaves, 20% of his bullsh*t will be overturned on its'' face.

Congress is too weak and too dependant on the banks, as is Clinton. Nothing is going to change, in fact, the courts will further solidify the banks rights to charge what the hell they want because there is no more bankruptcy in the country other than for corporations. Since Daniel Webster and the Slaughterhouse case(s) corporations have become persons protected by law, and person have become less-so and are persecuted, not protected by the laws.

[jerr11]

If the Fed goes thru with this, it''ll be only good thing they''ve done in 7 years!

But I''m not holding my breath.

The neocons will cave in to their banker buddies again!

[ubrew12]

redbarron73 said: "Hey, idiots. Dont like paying exorbitant credit card fees?"

You should be careful about calling Bear-Stearns ''idiots''.