Even with all its lobbying power, the credit card industry was not able to beat back the most sweeping overhaul in decades. Financial companies and trade groups argue that regulators are overreacting to problems in ways that will limit the availability of credit to customers.
Today's move by Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration is the first of what could be many attempts to further regulate the industry, as several members of Congress plan to codify the Fed's regulations next year and perhaps pass even more stringent rules. It also represents a significant shift in the thinking of the regulatory agencies, which still are run by Republican appointees. Analysts note that regulators have stepped back from an emphasis on educating customers about what they should do, primarily through disclosures, in favor of telling companies and customers what they can and cannot do.
The three agencies declined to release the final draft of the regulations. But the version made public in May would, among other things, prevent banks from raising interest rates on existing balances unless a payment was more than 30 days late, charging late fees without giving the borrower a reasonable amount of time to pay and applying payments so that debts with higher interest rates are repaid last. Sources said regulators would give card issuers until mid-2010 to comply with the rules.
The new regulations are not as generous as provisions in House Rep. Carolyn Maloney's Credit Cardholders' Bill of Rights, a measure that passed the House in September but has since stalled in the Senate. But the article quotes Sen. Christopher Dodd on Congress' intent to pass new requirements of their own:
Sen. Christopher J. Dodd (D-Conn.), who proposed a bill this year that would have extended even more protections to consumers, said that for the next Congress, credit card reform would be a top priority for the Senate Committee on Banking, Housing and Urban Affairs, which he leads.
"To restore our economic stability, we must stop credit card companies from ripping off their customers and driving them into deeper and deeper debt," he said. "While I expect the Federal Reserve's rules to be a significant step forward in addressing this issue, I believe we need a strong law in place to protect consumers from unfair credit card practices including 'anytime any reason' rate increases, universal default, excessive and unreasonable fees, and marketing targeted to young consumers."
It looks like one way or another, further regulation is in the works for credit card companies.
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