The Federal Reserve Board has finally unveiled its newly proposed truth in lending regulations. Reportedly, the proposal and its recommended changes will be the biggest made since the first regulations were developed 26 years ago. The main push behind these proposed regulations comes from what Congress considers to be “aggressive marketing” and “pricing practices” that retail lenders currently engage in
Another issue addressed by the proposal is the font size used to notify cardholders of changes. Currently, changes are often written in such a small font that some cardholders cannot read them while others do not bother. The regulations would also require posting interest rates on the monthly statement as well as a listing of any fees the customer has had to pay.
Many credit card companies currently provide cardholders with low introductory rates or even 0% APR for extended periods on balance transfers made from other cards. When the cardholder makes payments to the card, the credit card company applies the payment toward these debts rather than toward those that carry a higher interest rate. With the new regulations, credit card companies would be required to apply payments toward the higher interest debts first. Similarly, credit card companies will be required to clarify these introductory offers and what types of purchases or balance transfers qualify for the lower rates more clearly.
While consumer groups are happy to see Congress take this step in the right direction toward treating cardholders more fairly, they do not feel the action goes far enough. As Senator Carl M. Levin (D-Mich.) put it, “Congress needs to do more than require that unfair credit card practices be disclosed – it needs to end them.”
Levin is putting his money were his mouth is, as he has introduced a new bill that takes the current proposal further. With this bill, companies would not be allowed to charge interest on debt that is paid by its due date and there would be a cap on how high companies can raise interest rates as a penalty. The proposal would also prohibit charging interest on late fees or on over-the-limit fees. In addition, it would not allow card issuers to penalize cardholders if the issuer is delayed in crediting the account for a payment.
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