New Regulations Could Help Consumers in Debt - Total Bankruptcy
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Proposed Regulations to Stop Credit Card Abuses

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The Federal Reserve Board is taking a stand for consumers and pushing to end "unfair and deceptive" practices in the credit card industry against consumers who are already strapped for cash and struggling with the poor economy in the United States.

The Fed has proposed reigning in credit card companies and protecting consumers who owe from companies that arbitrarily raise interest rates or don't give borrowers adequate time to pay their bills. If approved, the new regulations will be the harshest slap down the credit card industry has been subjected to in decades and many people say it is about time.

Federal Reserve Chairman Ben Bernanke said that the proposed new regulations for the credit card industry aim to set a new baseline standard for fairness to consumers. With many more Americans reduced to relying on credit cards just to get by and obtain necessary items, it is essential that their credit card rates and payments remain predictable.

Of course the banking industry is not willing to roll over and play dead and let the new regulations be imposed on them. Banking officials say that the new regulations proposed by the fed will hurt consumers and are an unprecedented regulatory intrusion into marketplace pricing and product offerings.

According to an Associated Press report, president and chief executive of the American Banking Association Edward Yingling says that the proposed regulations would eliminate competition among banks and would drive consumer costs up while reducing credit choices and access to credit cards.

The Fed says that the proposed regulations are designed to protect consumers. After being criticized for not acting quickly enough to prevent the nationwide foreclosure crisis, the board is now taking preemptive precautions in regard to credit card debt.

Under the proposed new rules:

  • Credit card companies would have to allow consumers a reasonable amount of time, such as 21 days, to pay their bills, and unfair time constraints on payments would be prohibited.
  • Credit card companies would also no longer be allowed to unfairly allocate payments among balances with different interest rates. In cases such as credit card debt from cash advances and credit card debt from purchases on the same account accruing interest at different rates, the credit card company would not be able to unfairly credit payments to the balances with the lower interest rate.
  • The Fed also believes that credit card companies must be prohibited from retroactively raising interest rates on existing balances and should be prevented from charging high fees for exceeding the credit limit due to a hold placed on the account.
  • Also outlawed under the new regulations would be the practice of double-cycle billing that unfairly computes credit card balances, unfairly charging security deposits and fees for making credit available to consumers, and making deceptive offers of credit.

The Fed says that the new regulations may be finalized by January 1, 2009. Democrats in Congress praise the proposed regulations but fear that the changes will not come soon enough to help the millions of low income and middle class borrowers that critics say have been taken advantage of by the credit card industry and are feeling the weight of crushing consumer debt and edging toward bankruptcy.


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