Congress tackles credit card reform

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Congress takes a look at credit card practices...

Congress tackles credit card reform
April 17, 2008: Lawmakers say legislation is needed to curb many of the 'unfair' practices employed by credit card issuers.

Consumers, public interest groups and some federal regulators pushed lawmakers to enact sweeping changes to the credit card industry, aimed at remedying what they view as questionable practices of the credit card industry that keep consumers mired in debt.

More than half of the 15 witnesses that testified before a panel of the House Financial Services committee endorsed a 9-point legislative plan unveiled earlier this year by Rep. Carolyn Maloney, D-N.Y., dubbed the Credit Cardholders' Bill of Rights. "If this is going to be resolved, it has to be resolved here in Congress," said Sen. Carl Levin, D-Mich., who was among those who testified Thursday.

Thursday's hearing, which marked the fourth time in the past year that House lawmakers tackled the issue, has become an issue that has taken on more relevance as Americans face rising unemployment, rising inflation and have had to increasingly rely on their credit cards to make ends meet.

Based on the most recent data from the Federal Reserve, the average American family carries an average of $2,200 in credit card debt. Critics have charged that many credit card issuers engaged in "unfair" practices such as raising interest rates on debt even when consumers pay on time or imposing excessive fees.

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Regulators zero in on credit card reform...

Fed moves on credit card crackdown
May 2, 2008: Bank regulators approve proposal to eliminate industry practices like 'double-cycle billing' as banks push back. New rules could be in place by end of year.

The Federal Reserve on Friday pushed ahead with a proposal to stop abuses by credit card issuers, a day after two other key bank regulatory agencies proposed effectively the same package of new rules. The move comes at a time when the $2 trillion industry has come under increasing scrutiny. "The proposed rules are intended to establish a new baseline for fairness in how credit card plans operate," said Ben Bernanke, chairman of the Federal Reserve, which regulates many U.S. banks. "Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs."

Among other things, the plan would allow consumers more time to pay monthly bills. It would also 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. A top financial services lobbyist blasted the plan. "The Federal Reserve's proposal is an unprecedented regulatory intrusion into marketplace pricing and product offerings," said Edward Yingling, chief executive of the American Bankers Association.

On Thursday, the Office of Thrift Supervision, responsible for overseeing the nation's savings and loans, and the National Credit Union Administration, approved proposed rules the Fed "substantively similar." The reforms will be subject to public comment for 75 days. The agencies expect to finalize any new regulatory changes by the end of the year.

Regulators under pressure to act

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Watch out for the loan sharks...

Debt collectors on the rampage
July 7, 2008: More consumers are finding themselves the target of aggressive agents who don't always play by the rules. Here's what you need to know.

Six months after Rob Hruskoci closed his business, a debt collector called and demanded payment that day for the $5,000 balance on his business credit card. "They want me to wire them $1,900 in 5 hours," Hruskoci said. "It was all about intimidation and harassment." With the economy in a tailspin, more consumers like Hruskoci are falling behind in their loan repayments, and finding themselves the target of aggressive debt collectors.

Complaints against debt collectors have risen substantially in the last few years, according to the Better Business Bureau - up 20% in 2006 and 26% in 2007, according to preliminary figures. As cash-strapped consumers struggle to make ends meet, third-party collection agencies are buying up debt from companies and actively trying to recoup losses and collect commissions. Collection services go after past-due accounts referred to them by various credit grantors such as credit card issuers, banks, car dealerships, stores and hospitals - any business that extends credit or offers payment installment plans.

There are about 6,500 collection agencies in the United States. And they serve a useful purpose - debt collectors returned $39.3 billion to the U.S. economy in 2005, according to the Association of Credit and Collection Professionals. Third-party collectors are regulated by the Fair Debt Collection Practices Act (FDCPA), which is administered by the Federal Trade Commission (FTC). There are strict guidelines aimed at protecting consumers from abusive or unfair debt collection practices. But there are also agencies that blatantly disregard those rules.

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