On December 18, the Federal Reserve Board released new regulations for credit card issuers. The substance of the regulations is great – in some ways it’s even stronger than what was proposed (more on this below). But the ridiculous problem with the Fed’s announcement is that, for some reason, the rules won’t go into effect until July 1, 2010. That’s eighteen months from when the regs came out in December.
Eighteen months is a long time! In eighteen months people can get into and out of all sorts of shenanigans, financial, and otherwise. And given the direction the economy is heading, doesn’t it seem like now would be a better moment to enact these long-overdue consumer protections, and keep more money in consumers’ hands?
Of course, banks do need some amount of time to conform their procedures to the new rules. But this really shouldn’t take longer than three months. After all, the industry is miraculously efficient when adopting new procedures that they stand to profit from. Why on earth do they need eighteen months in this case?
The Fed’s rule, while strong, does not cover everything consumer advocates would ideally like to see. Consumers Union put together this list of what the new rule will and won’t do.
Here is one example of what the rule will do: it prevents credit card companies from changing your interest rate on old balances unless you are more than 30 days late, or the card is a variable rate card. As for the “what’s missing” category: the rule doesn’t address the size and duration of “penalty” interest rates on new balances, which can be both astronomical and interminable for minor infractions.
Consumer advocates are not optimistic that these missing pieces will be addressed in this Congress. But fortunately, there is hope that Congress will speed up the implementation process by passing a law that mirrors the Fed’s rules but would take effect 90 days from passage.
Rep. Carolyn Maloney (D, NY) reintroduced her Credit Cardholders Bill of Rights with a 90-day time frame (Sam blogged about the bill when it passed the House in the last Congress). Senator Charles Schumer (D, NY) introduced companion legislation in the Senate – which is great news, since last session the Senate didn’t move on credit card reform at all.
Of course, Congress has been pretty tied up with the stimulus package, and once that is through they will be pretty busy with the omnibus appropriations bill. But even if it takes them a whole darn year to pass something, we will still come out ahead of the Fed.
Visit AFFIL’s (newly updated!) website for more info on credit cards.
Sarah Byrnes works for Americans for Fairness in Lending, and will be posting at Caveat Emptor until 2.13.2009.
(photo: Matthew Gauvin’s winning cartoon from the Consumers Union Credit Card Reform Cartoon Contest)