Feds Eye Credit Card Reform

WASHINGTON (May 2) - The Federal Reserve and other regulators are planning tighter rules to stop credit card companies from unfairly raising interest rates and to make sure they give Americans enough time to pay their bills.

In the most far-reaching crackdown on the credit industry in decades, the Fed 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 is given a reasonable period of time, such as 21 days, to pay;

Unfairly allocating payments among balances with different interest rates;

Unfairly raising annual percentage rates on outstanding balances;

Placing too-high fees for exceeding the credit limit solely because of a hold placed on the account;

Unfairly computing balances;

Unfairly adding security deposits and fees for issuing credit or making credit available;

Making deceptive offers of credit.

In news releases, the agencies said the proposed rules also would require federal credit unions to give consumers a chance to opt out of an overdraft protection program. And they would prohibit those institutions from charging a fee for an overdraft caused by a hold placed on consumer's funds when a person uses a debit card.

The Fed, which is expected to vote Friday 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 banking industry was expected to fight the new rules.

The new regulations could be finalized by the end of the year, the agencies said.

The proposed rules will be available at 2:30 EDT at:

National Credit Union Administration: http://www.ncua.gov/RegulationsOpinionsLaws/proposed-regs.html