New Credit Card Regulations?

Consumers will soon be benefiting from new credit card regulations being enacted by the Federal Reserve Bank and possible new laws being passed by law makers. With the current financial crises it's no surprise sentiment in Washington has shifted towards the consumer from the banking industry.

Shifting sentiment and the Troubled Asset Relief Program (TARP) in full swing, lawmakers have tremendous leeway over the banks to force changes, more so then any time in recent memory. Lawmakers have to be sure to tread carefully by not let the pendulum swing to far the other way. Creating laws the restrict credit further by lowering the banks profitability and ability to asses risk on credit cards, particularly with riskier credit card holders.

Some unfair credit card practices should be changed, alleviating some of the pressure on consumers. After all, banks are getting relief from the goverment because of their reckless lending, why not the consumer as well?

The Federal Reserve has proposed the following changes:

• Ban double-cycle billing. The practice of charging interest on two billing cycles. Example. You owe $3000 with no prior balance, you pay $1000 by the due date, the next billing cycle comes around, any reasonable person would think they would only have to pay interest on the remaining $2,000, well with double cycle billing you would pay interest on the original $3,000 balance and the remaining $2,000.
• Prohibit applying rate increases to old credit card balance
• Apply credit card payments to all balances proportionally. If you owe $1,000 at a 0% interest rate and $1,000 at a 20% interest rate a $200 pament would be applied equally, $100 for the 0% balance and $100 for the 20% balance. Right now most banks would apply the $200 payment to the 0% balance first.
• A credit card payment received as late as 5:00 pm on the due date would be considered on time.

The Credit Cardholders' Bill of Rights propose the following changes:

• Ban universal default. If you are late or default on one credit card the other credit card companies could not universally raise your interest rates.
• Require credit card compaines to send bills out 25 days before the due date. Right now some companies sent out bills very close to the due date.
• Require credit card companies to notify credit card holders of any rate increase 45 days in advance.

The proposed bill also contains many of the new regulations the Fed has proposed.

Related: Michigan Bankruptcy

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