Fed proposes new credit card rules
The Federal Reserve on Tuesday moved to stop credit card issuers from using a regulatory loophole to charge the most vulnerable customers exorbitant sign-up fees.</br></br>The proposed regulation is aimed squarely at "fee-harvester cards," targeted at consumers with poor credit histories. The cards carry interest rates as high as 79 percent and typically have limits of a few hundred dollars. They also come with hefty annual fees and other charges that can quickly eat up the available credit.</br></br>One card described in a 2007 report by the National Consumer Law Center, an advocacy group, had a $300 limit with $247 in monthly and annual fees, leaving consumers with only $53 to spend.</br></br>The landmark Credit Card Act that was enacted last year sought to tamp down such practices by capping card fees at 25 percent of the credit limit for the first year of use. Web sites of some credit card companies state the cards are no longer available.</br></br>But some issuers found a way around the law by charging a sign-up fee before the account is actually opened. One such card advertised on First Premier Bank's Web site assesses a $25 processing fee to register for the card. The site notes, however, that "for convenience this Processing Fee can be paid over time."