Credit card changes will give consumers a break
The rules from federal regulators represent a sweeping change. But the new limits on fees and rates don't start until 2010.
Responding to rising consumer complaints, federal regulators Thursday adopted the most sweeping new rules for the credit card industry in three decades, including tougher restrictions on interest rate hikes and late fees.
The regulations, which take effect in July 2010, would block card companies from applying higher interest rates on existing balances. Late fees could not be charged without giving consumers at least 21 days to make a payment.
The new measures were needed to reverse a trend in which the pricing schemes and terms of credit cards have grown increasingly complicated and obscure, leaving consumers frustrated by mysterious charges, Federal Reserve Chairman Ben S. Bernanke said.
The banking industry opposed the measures, contending that card issuers would be less likely to take a chance on people with weak credit. Card companies will also be forced to raise interest rates to cover the expense of the new measures, saddling most card users with higher costs, said Edward L. Yingling, chief executive of the American Bankers Assn.
But consumer advocates said the measures, adopted by the Fed, the Office of Thrift Supervision and the National Credit Union Administration, were needed to address hidden traps and fees nestled in the fine print of card applications.
"There has been a long time since these regulations have changed, and banking and card companies have had very successful lobbies that kept any meaningful legislation at bay," said Ginna Green, a spokeswoman for the Center for Responsible Lending. "But consumer advocates and congressional leadership have put the pressure on regulators to do what really needs to be done for a number of years."
Nicoli Tucker, a marriage and family therapist from Northridge, was among those pushing for changes.
Tucker has held multiple cards over the years, and said she had watched her interest rates soar over time from 5% to as high as 28%. At the same time, she has watched the time she is allotted to make a payment shrink to as little as two weeks, down from almost a month.
Several years ago, Tucker said she accepted a credit card with a $15,000 limit through a bank's promotional offer to finish a home-remodeling project, which she said she paid off within four months.
But after Tucker missed a notice for what she described as an unexplained $6 service charge, late fees on the disputed charge quickly barreled up to $80.
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