Credit card reforms sought

The Baltimore Sun

Jack McMillin of Alaska says consumers should be able to count on their credit card terms not changing - at least for a specified time. June Peterson of Florida complains that she has barely any time to mail in her card payment before interest starts racking up.

Lee and Patsy Solomon want card issuers to print the payment due date in bigger type and display it prominently on the monthly bill. "It's as if they want you to be late so as to accrue interest charges," the California couple say.

And Floridian Ben Brooks just wants to see a certain credit-card issuer "gutted, fined and shut down."

These are some of the early public comments to the Federal Reserve Board over its proposed changes in the disclosures credit card companies make. It has been more than a quarter-century since the Fed has undertaken a thorough review of the regulation involving disclosures.

The review and changes are long overdue. Credit cards play a dominant role in our lives and have only gotten more confusing. That's what the Fed discovered in coming up with its proposal. It conducted one-on-one interviews with consumers to test their understanding of disclosures and found that they often didn't notice key terms buried in legalese.

The Fed proposed changes about two weeks ago and will accept public comments for about four months. These are among the changes proposed:

Issuers would have to give 45 days' notice, up from 15, when they change the terms of a credit card agreement. That would give consumers time to look for another card or pay off their balance.

Customers would have to be notified in writing 45 days before their interest rate was raised because of a late payment or default. Currently, no advance notice is required.

Creditors couldn't claim in ads that an interest rate was "fixed" unless the rate truly didn't change or wouldn't change for a specific period stated in the ad.

Card issuers would have to disclose in the table of terms the fees for late payments, exceeding credit limits, cash advances, balance transfers and returned payments.

Issuers of subprime credit cards would have to provide extra disclosures so that consumers understand that large upfront fees will significantly erode their available credit.

Creditors would have to state the payment due date on the front of the monthly statement and, nearby, post the cutoff time if it is before 5 p.m. on that date. Consumers assume they have until the end of the business day to get their payment in. Some creditors have an earlier deadline, and consumers get whacked by a late fee for being a couple of hours late.

"The overall point is that these disclosures could be very helpful but they certainly aren't enough," Ruth Susswein, a deputy director for Consumer Action, says of the proposed disclosures.

Her group supports legislation pending in Congress that would go further. It would eliminate practices such as "universal default" and "double-cycle billing."

With universal default, your interest rate can more than double if you make a late payment on some bill unrelated to the credit card. With double-cycle billing, you can end up paying interest on debt you paid off on time.

Susswein says Consumer Action is reviewing the Fed's proposal and probably will submit suggestions.

You can, too. Consumers aren't often invited to bend the ear of Fed Chairman Ben S. Bernanke over an issue that's so near and dear to their pocketbooks. OK, maybe Bernanke himself won't read your e-mail, but the Fed says it listens to consumers.

You can e-mail your comments to and include "Docket No. R-1286" in the subject line. Send a fax to 202-452-3819 or 202-452-3102. Or mail a letter to Jennifer J. Johnson, secretary, Board of Governors of the Federal Reserve System, 20th St. and Constitution Ave. N.W., Washington, D.C. 20551.

Maybe you can join the couple who say of universal default, "This has got to stop!"

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