Fed Seeks Ban on Some Practices of Credit Card Firms
Federal Reserve Chairman Ben S. Bernanke said yesterday that the agency's effort to regulate the credit card industry by requiring better disclosure forms has fallen short and that certain practices have to be banned to protect consumers.</br></br>"Based on our review of consumers' response to the Board's recent regulatory initiative, it seems clear that improved disclosures alone cannot solve all of the problems consumers face in trying to manage their credit card accounts," he said.</br></br>Bernanke's comments came during a meeting in which the Federal Reserve board unveiled its proposal to prohibit practices by credit card issuers that it deems "unfair" and "deceptive." The Fed joined the Treasury's Office of Thrift Supervision, which regulates all federal and some state thrift institutions, and the National Credit Union Administration, which oversees credit unions, in drafting the proposed rules, which could be finalized by the end of the year.</br></br>If they are instituted, they would constitute the most significant crackdown on the credit card industry in decades. The rules would, among other things, specify when card issuers can increase interest rates on existing balances, ban finance charges on balances that have been repaid, and prohibit late fees on customers who were not given a reasonable amount of time to pay.</br></br>Consumers have long complained about such practices. The Fed responded last year with a proposal, still under consideration, to require card companies to improve disclosure forms.