Washington – The U.S. credit card industry, harshly criticized for imposing surprise fees and interest rate hikes on consumers, may face a day of reckoning on Thursday.
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The Federal Reserve is to vote on credit card reforms that may bring some relief to customers who face a variety of ways for being hit with late fees, universal defaults, shorter payment periods and confusing payment allocations for different balances.
Credit card users likely also would see easier-to-read tables in their monthly statements as a result of the changes.
The new rules, which were proposed earlier this year, are expected to total some 1,000 pages. They need approval of the Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration, which all are expected to act on Thursday.
Consumer groups say practices of credit card companies blindside consumers and U.S. lawmakers have threatened legislation if regulators did not use their consumer protection powers to reform the industry.
With Democrats strengthening their control of the next Congress that convenes in January and the financial services sector in turmoil, credit card companies that resisted the changes increasingly have accepted them as inevitable.
They have warned that interest rates charged on credit cards will rise for all borrowers and that borrowing limits may be reduce because of the changes.
The industry maintains that credit cards provide a service to consumers with convenience and sometimes free loans.
“The new rules will be a challenge to the business,” said Peter Garuccio, director of public relations at the American Bankers Association trade group.
POTENTIAL SWEEPING IMPACT
In 2007, Americans were using an estimated 694.4 billion credit cards with Visa, MasterCard, American Express and Discover logos, according to the Card Industry Directory.
Banking regulators have been using focus groups to test the impact of changing credit card rules for the past couple of years and on Thursday are expected finalize some changes.
They are expected to prohibit credit card companies from increasing rates at will, with some exceptions such as those that apply to people who fail to pay a bill within 30 days.
So-called universal default, which permits changing card terms if the borrower defaults on another bill such as utilities or a gym membership, also is expected to be banned.
Double-cycle billing, in which card companies reach back to earlier billing cycles to help calculate interest charged in the current cycle, also is expected to be eliminated.
With the U.S. economy in recession, the market that trades in credit card asset-backed securities faces increasing stress as more consumers fall behind on payments.
As delinquencies and charge-offs — balances written off as uncollectible — on credit cards rise, investors demand higher yield spreads for credit card-backed securities.
The ABA represents the biggest issuers of Visa and MasterCard. Citigroup, Bank of America and JPMorgan Chase enjoyed almost 70 percent of the credit card market at the end of 2007, according to the Card Industry Directory.
about time my friends, about time..
Not enouugh concessions from these pigs- they get the money for a couple of per cent and charge interest like they do. I have a credit card I am trying to pay off, and getting nowhere
the 29% they are charging me.
Credit card companies aren’t intrested in giving you credit. They are intrested in fees, intrest, late fees etc. If we don’t allow them to charge those fees they will stop giving credit. This is the root of our financial crisis. If banks are not allowed to forclose (or even if they have to wait longer to forclose) there is NO reason to lend money to buy house. Hence nobody can get a loan. Hence nobody can buy a house. Hence house values go down. Hence the mortagage on your property is more than the property value… It does not end. The only way to get out of this is to allow the banks who have the money to charge for borrowing the money. Not allowing fees and charges is just gonna worsen the crisis. People need to take responsibility, and if they cannot pay their bills on time they, and only they, should have to suffer the consequences.
By the way, 1000 sheets of paper, whats that going to do to the environment?!
Yes, 31% APR that I am paying is ridiculous, but I got myself in my own mess, the credit card company never asked me to be late, nor did they raise rates when I was on time. Are they really taking advantage? I guess it depends who you ask, but they are not scamming us. When government touchs something they end up ruining things, in this case credit card companies will stop lending causing a deeper recession. They didn’t touch gas prices (even though people demanded they do) and now the market corrected itself and its down to $1.50. Please don’t think government will fix these things for you.
Ever heard of living within your means!!!
Stop digging your own grave and then blaming the world!
Don’t buy if you don’t have the $. And if you’re desperate and use CC, they state all their charges up front. But this is the US in 2008, where the government prints money or takes from anyone who has to continue to pump hot air into the balloon called Other People’s Money (OPM or Opium).
There’s a rampant, contagious disease out there called “irresponsibility”. And the cure for it – “get only what you have cash in hand for” – is too expensive.
Enjoy the ride.
Amazing world we live in. We go from ‘free’ credit to all, and now they are closing the door.
If you’ve never been late or in default, raising rates is outrageous. Citibank raised me 4 points. Those SOBs had to crawl begging to the government. Fed Funds rate is at 1%. If Citibank can’t make money in that enviornment then maybe they should have folded.
Many of us reponsible for our actions, it’s time for the banks to show us the same courtesy.
Double cycle billing is wrong. It means that if you had a balance say for Jan buton Feb you paid your entire balance including january’s you will still be charged on your march purcases. The only time you stop paying interest is if you have 2 consecutive months with a zero balance. This practice is wrong. Universal defoult is also wrong, the bankc can raise your interest from 10% up to 30% becouse you were late on a bill say your electicty bill. This is wrong your balance to the bank was paid on time, if you were late someplace else why should the bank have the right to increase your interest when you paid then on time, and with such a big increase. I only wonder what else is in those 1000 documents. Did you know that there used to be a grace period of 25-30 days without anyone paying attention they shortent it to 17-20 so if you were late by mistake your interest will go up and not only on this card but on all your cards, seems fair? The banks also asses you through your moving violations the more you have the more of a credit risk you are considerd and your interest go’s up and as you guessed by now on all your creadit cards.
in my opinion the best credit card relief would be to give us a break from all those huge bills . don’t these guys know the economy is in der aired . they have enough money as it is why would they squeeze us out of our last penny
I think that credit cards should be abolished. If you don’t want to walk around with money, then use a debit card. What the credit card companies are doing is loan sharking and is organized crime to the point as they have the government helping them suffocate their customers. Anybody remember those predatory lending letters telling you to take the vacation you always wanted or buy the diamond ring that you always wanted. They choose to have their headquarters in two or three states where usury laws are the most relaxed. In my opinion it is criminal of the government for not stopping the banking credit card criminality.