The government wants to make it easier for you to know when your credit card company is about to pull a fast one, or to figure out when it already has.
The Federal Reserve Board announced plans Wednesday to revamp regulations so that monthly credit card bills would be easier to understand and consumers would get more advance warning when rates were being raised.
Consumer advocates called the Fed's proposal a step in the right direction but said it didn't go far enough.
"Telling you that you are about to be ripped off is not a consumer protection," said Ed Mierzwinski, consumer program director at U.S. Public Interest Research Group.
"No matter what minor fixes the Fed provides to disclosure [rules], those fixes will not solve the fundamental problems in credit card marketing that allow companies to change the rules at any time and impose retroactive interest rate increases. Those practices need to be banned."
Under the Fed's plan, companies would have to notify customers at least 45 days -- not the current 15 -- before changing the terms of an account, like imposing higher penalties for missed or late payments.
Details about accounts would be printed in an easy-to-understand table on the first page of monthly bills, not in super-fine print on a separate page.
Companies couldn't claim that a card bore a fixed interest rate unless they were willing to disclose -- and guarantee -- how long that fixed rate would last. (Under current rules, credit card companies can change the rate on their fixed-rate cards by simply providing 15 days' notice.)
And they would have to clearly disclose the terms and conditions that might cause a rate to rise to a "penalty" rate, as it does under the widely hated practice of so-called universal default.
Simply put, that allows one credit card company to impose a penalty rate if it finds out you were late paying an entirely unrelated bill.
Banks and credit card issuers said they needed to review the plan to see whether it adequately weighed the public's right to clearer disclosure against the increased costs to issuers.
"They did a very good effort to try to simplify so that disclosures are more understandable for consumers, but they need to strike a balance between what's understandable to consumers and the cost of providing it," said Nessa Feddis, senior federal counsel of the American Bankers Assn.
