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Regulators are planning tighter rules to stop credit card companies from unfairly raising interest rates and to make sure they give people enough time to pay their bills.
In the most far-reaching crackdown on the credit industry in decades, the Federal Reserve and two federal agencies are proposing new rules that would prohibit:
Placing unfair time constraints on payments. A payment could not be deemed late unless the borrower was given a reasonable period of time, such as 21 days, to pay.
Unfairly allocating payments among balances with different interest rates. The proposal would require that payments above the minimum be applied in a way that was "beneficial" for the cardholder. For example, a payment above the minimum would go toward a large balance at an 18% annual percentage rate rather than a small 0% balance transfer.
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Unfairly raising annual percentage rates on outstanding balances. The rule would ban retroactive interest-rate increases on existing outstanding balances unless a consumer was 30 days late on the account. Banks would not be able to retroactively raise rates on good customers for activity unrelated to the specific card, such as a late payment on a mortgage.
Placing too-high fees for exceeding the credit limit solely because of a hold placed on the account, usually by rental car companies or hotels.
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Unfairly computing balances with methods such as "two-cycle billing," which can result in an interest charge even in a month in which the cardholder carries no balance.
Unfairly adding security deposits and fees for issuing credit or making credit available. The rules would ban fees that consumed a majority of a new card's credit limit.
Making deceptive offers of credit. Card offers would have to clearly state the factors required to achieve the interest rate and credit limit advertised.
The Fed, which is expected to vote this afternoon on its approval of the proposed rules, is acting in conjunction with the National Credit Union Administration and the Office of Thrift Supervision. The identical proposals would cover banks, credit unions and thrifts, respectively.
Continued: A good start, most say
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