06/30/2010 - Congress passed legislation last year banning many of the worst practices of credit card companies and ordered the Federal Reserve to issue new rules to ensure that late charges and all other penalties — a major source of abuse — are “reasonable and proportional.”
The final version of those rules were issued last month, and there is a lot to like about them. Gone, for instance, are the days when banks can charge a late fee larger than the payment due. But the Fed dropped the ball completely when it refused to regulate penalty interest charges. Card issuers will still be able to double or even triple the interest rate if the cardholder falls two months behind in payments.
That dubious reading is especially troubling given a recent analysis by the Pew Charitable Trusts’ Safe Credit Card Project that found that some companies fail to disclose the penalty interest charges in their contracts — a clear violation of banking law.
Read the full editorial, The Fed and Your Credit Card on the New York Times' Web site.
Pew is no longer active in this line of work, but for more information visit the Safe Credit Cards Project on PewHealth.org.