Ask anyone with a credit card about the abusive practices of lenders and you're likely to hear a torrent of complaints about unfair late fees, inexplicable interest-rate increases, misleading terms, confusing rules and much more. Last week, the Federal Reserve Board finally took steps to crack down on the credit-card industry, but banks signaled immediately that they're going to put up a fight. The Fed must hold its ground. Consumers need a break now more than ever.
Relying on credit
With the economy in trouble, more American families are having to rely on credit cards to help meet everyday expenses, including the cost of groceries and gasoline. In many cases, they are finding it necessary to wait until the last minute to pay bills, and they may occasionally exceed the credit limit as the squeeze on the household budget gets tighter. All too often they run into trouble, as lenders pounce on the slightest mistake to impose unreasonable penalties and raise interest rates.
This is where the new Fed rules would help. One proposed measure would prohibit lenders from arbitrarily raising interest rates on any debt unless the borrower was more than a month late in making a payment. Another rule would declare that payments could no longer be classified as late if borrowers did not get statements at least 21 days ahead of the due date.
These are common-sense proposals likely to help consumers who have been at the mercy of unfair lenders for too long. The only thing wrong with them, as we see it, is that they don't take effect soon enough -- perhaps not until late this year or early the next, following a public-comment period and other rule-making delays -- and they don't go far enough.
Many consumers have learned the hard way that even if they pay the minimum amount and pay on time, they still get penalized by higher rates or added fees, or both. This is because even cardholders in good standing may have a problem with another, unrelated lender, and that becomes a pretext for a penalty by the card issuer. The new Fed rules do not address this so-called ''universal default'' rule, but it would be banned under the 'Credit Cardholders' Bill of Rights'' (H.R. 5244) authored by U.S. Rep. Carolyn B. Maloney, D-N.Y.
Protect consumers
Her proposal and a similar bill by Sen. Chris Dodd, D-Conn., represent broader protection for consumers because they target a wider array of unfair practices. The Fed deserves credit for moving positively, if belatedly, to eliminate some unfair practices involving credit cards, but legislation offers a better, lasting solution. Rep. Maloney has more than 100 co-sponsors for her bill, which should be more than enough to bring this to the floor for a vote without further delay.
