Fed Set to Tighten Screws on Card Issuers: Report

The Federal Reserve is considering implementing new rules related to credit card issuers, including limiting the banks’ ability to institute new fees and change interest rates, according to a story in The Wall Street Journal today.

The paper reported that sources told it that regulators could label certain credit card practices as unfair or deceptive. The Fed is primarily looking at limiting card issuers’ ability to increase interest rates on a card balance, and the way payments are applied to cardholders’ balances, according to the Journal. The Fed has held a number of private meetings in recent months with consumer organizations and bankers to hash out an agreement.

A public meeting is planned for this Friday that would include Rep. Barney Frank, the Massachusetts Democrat who has called for greater regulation of issuers. Frank leads the House Financial Services Committee.

“There are systematic abuses by credit card issuers toward their cardholders,” said Steven Adamske, who is on the Democratic staff at the committee. Adamske notes that there have been recent hearings on a proposal from Rep. Carolyn Maloney that would heighten regulations on issuers. Maloney announced earlier this month that her Credit Cardholders Bill of Rights has more than 100 cosponsors.
 
Any change in the rules would likely face opposition from trade groups such as the American Bankers Association. The Federal Reserve did not return calls for comment.