Capital One Worries About Tighter Credit-Card Rules

Credit card companies are worried about new Federal Reserve rules due by year-end that would limit their ability to set credit card charges as they please.

Consumer groups have long complained that credit card companies abuse customers through predatory and deceptive advertising and by erecting complicated and one-sided schemes to charge higher fees if credit balances go too high or a customer is slightly late with a payment.

Concerns about the new rules are buried in Capital One Financial's most recent 10-Q filing of Nov. 10. It says the new rules would:

• Impose restrictions on increases in the rate charged on pre-existing credit card balances.
• Prohibit the use of payment allocation methods that maximize interest charges.
• Limit the imposition of "default" annual percentage rates on existing credit card balances.
• Prohibit the imposition of interest charges using the "two-cycle" billing method.
• Require that consumers receive a certain amount of time to make their credit card payments.

Moreover, credit card restrictions could be part of any stimulus package that Democrats in Congress might put together. President-elect Barack Obama fought against deceptive credit card practices while a senator. In 2007, he proposed crackdowns on credit card companies and a reform of laws to make it easier for individuals to go bankrupt.

An aggressive credit card marketer, Cap One could be under pressure if it fights against credit card reforms since it has applied for $3.55 billion in stock financing from the Treasury Department.