Released: July 10, 2006

Fed credit card report conclusions questioned

Source: By Kathy Chu, USA Today

A new Federal Reserve report that finds little evidence that card issuers are offering credit to consumers “indiscriminately” has triggered criticism from consumer groups, who say the report is unduly protective of banks. In its report, the Fed wrote that “as a matter of industry practice ... card issuers do not solicit customers or extend credit to them indiscriminately” without assessing their ability to repay.

The report noted that even though 71% of households had credit cards in 2004, the portion of household income that goes toward required payments on all types of consumer debt has risen only modestly in recent years.

Linda Sherry, director of national priorities for Consumer Action, complains that “from a consumer-advocate point of view, I feel that (the Fed) just bends over backwards for the banking industry.”

Sherry adds that there’s a pattern of card companies “continuously rewarding you with higher credit limits” even if you don’t want them.

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