The Federal Reserve Board on May 23 unveiled a number of proposed revisions to the Truth in Lending Act aimed at helping consumers better understand the terms and conditions of their credit card accounts.
  The revisions, open for public comment until mid-September, would require lenders to change the format, timing and content requirements for credit card applications and solicitations, as well as for account openings and periodic balance statements.
  Other changes would require companies to give cardholders 45-day notices before changing the terms of their credit card contracts, 30 days longer than the current 15-day notice, and to add penalty interest rates to the list of changes that require advance notice.
  "Our goal is to take a complex credit product and design disclosures that can explain the terms not only accurately but also clearly enough to be meaningful and useful to consumers-all while enhancing, not stifling competition and innovation," Fed Gov. Randall S. Kroszner said during the central bank's May 23 meeting.
  Following the release of the proposed revisions, Edward Yingling, president and CEO of the American Bankers Association, stressed the need for new rules, noting that the current regulations have not kept pace with credit card pricings' increasing complexity.
  "We strongly agree that improved disclosures empower consumers to make better choices in our competitive marketplace," he said in a statement.
  Testifying at a June hearing on industry and regulatory proposals for improving credit card consumer protection, held by the House Subcommittee on Financial Institutions and Consumer Credit, Kathleen Keest, senior policy counsel for the Center for Responsible Lending, lauded the Fed's proposals to make disclosure easier for average consumers to understand.
  But she said proposed changes to the information that must be disclosed "needs improvement." For example, the Fed should make sure that any list of finance charges issuers are required to specifically disclose would not leave loopholes for card issuers to make up new types of finance charges not on that list, Keest said.
  Also in May, Senate Permanent Subcommittee on Investigations Chairman Carl Levin (D-Mich.) and Sen. Claire McCaskill (D-Mo.) introduced a bill dubbed "The Stop Unfair Practices in Credit Cards Act" that would bar companies from engaging in practices such as over-limit fees. Such fees occur when an issuer tacks on an additional fee after a customer exceeds his or her original credit limit.
  "Credit card issuers like to say that they are engaged in a risky business, lending unsecured debt to millions of consumers, and that's why they have to set interest rates so high and impose so many fees," Levin said as he introduced the bill. "But the data show that, typically, 95% to 97% of U.S. cardholders pay their bills. And it is clear that credit card operations are enormously profitable."
  The bill includes provisions that prohibit interest-rate hikes on a credit card account unless the cardholder agrees to them at the time. It also limits penalty interest-rate hikes to seven percentage points.
  In addition, the bill requires interest-rate hikes to apply only to future credit card debt and not to debt incurred before the increase. And it prohibits issuers from charging interest on credit card transaction fees, such as late fees and over-limit fees.
  At Cards&Payments deadline, the bill was to be referred to the Senate Banking Committee, which has primary jurisdiction over credit card legislation and held hearings earlier this year on unfair credit card practices.
  (c) 2007 Cards&Payments and SourceMedia, Inc. All Rights Reserved.
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