Released: July 18, 2008

Consumer Action comments on Fed credit card proposals

Contact: Linda Sherry, 202-544-3088

Consumer Action today submitted comments on the Federal Reserve's proposed rule changes under Regulation AA - Unfair or Deceptive Acts or Practices [R-1314] and Regulation Z - Truth in Lending [R-1286]. In its comments, which can be obtained in the Downloads field below, Consumer Action strongly supported the proposed rule to protect cardholders from increases on existing balances unless a payment is 30 days late and asked the Fed and other federal agencies responsible for the rules (Office of Thrift Supervision and the National Credit Union Administration) to hold the line against exceptions to the prohibition on retroactive rate increases. Consumer Action also asked the agencies to ban outright “universal default” and similar practices under which a creditor increases a cardholder’s interest rate substantially when the cardholder makes a late payment on an account with a different creditor. The organization believes that under no circumstances is it fair to amend the terms of an account with an excellent payment record—even on a forward-going basis—because of outside circumstances. In addition, we urged the agencies to look beyond default rates, to clauses in the fine print of solicitations and cardholder agreements commonly labeled change of terms provisions. This is the legal boilerplate that gives issuers the right to change APRs and other key terms at will—at any time, for any reason. Consumers deserve protection from typical “take it or leave it” credit card contracts that favor the issuer’s interests and leave the cardholder in a constant state of insecurity—even with the 45-day notice for changes in terms proposed by the Fed. "Cardholders must be able to rely on the contract provided to them at account opening," said Linda Sherry, director of national priorities. "Many family budgets are built on these provisions. If they cannot be relied on, then U.S. families truly are living in a 'house of cards' that could collapse at any time."

Downloads

Consumer Action comments on Fed credit card proposals   (Dockets_1314_1286.pdf)