5/2/08

current event
title:Regulators zero in on credit card reform
who:Federal regulators
what:Federal regulators are pushing ahead to stop abuses by credit card issuers at a time when the $2 trillion industry has come under increasing scrutiny.
On Thursday, the Office of Thrift Supervision, responsible for overseeing the nation's savings and loans, endorsed a seven-point plan to tackle "unfair" and "deceptive" practices by companies that issue credit cards.
The plan would allow consumers more time to pay their monthly bill. It would prevent companies from applying interest-rate increases retroactively to pre-existing balances. And it would ban "double cycle billing," a practice that computes finance charges based on previous billing cycles.
when:may1,2008
where:NEW YORK
why:The National Credit Union Administration board also approved the proposed rules Thursday. The Federal Reserve is expected sign off on it no later than Friday.
Under the proposal, companies that issue credit cards would be required to outline the factors that determine which of several advertised interest rates and credit limits a customer will receive. In addition, the rules would prevent companies from charging fees to open an account and receive credit.
Regulators, most notably the Fed, have been under pressure from politicians to do a better job of overseeing the banking industry in general or risk losing some of their regulatory powers.
how:Americans with shabby credit histories, for example, may no longer have similar access to credit. At the same time, consumers with good credit could soon find themselves facing higher interest rates.
In the early 1980s, before issuers relied on credit scores in vetting customers, interest rates hovered around 18% and everyone paid an annual fee.
Nowadays consumers pay an average interest rate of just over 13%, and three quarters of card issuers do not charge an annual fee, according to the American Bankers Association.
The consumer federation and the U.S. Public Interest Research Group said they were encouraged by the joint proposal, but added that regulators did not address other problems like unwarranted interest rate changes and aggressive marketing to college students.
"It's a good first step in addressing a number of abusive practices," said Travis Plunkett, legislative director at the consumer federation. "However, it will still be necessary for Congress to step in because the proposal only deals with a few of the problems that have been identified."
At the same time, legislators could have quite a fight on their hands. Previous efforts trying to reform the industry have largely failed, while recent legislative proposals have found little support among GOP lawmakers.
The reforms proposed this week will be open for public comment for 75 days. The agencies expect to finalize any new regulatory changes by the end of the year.