The Federal Reserve Board closed out last week by announcing a set of regulations that would end some of the most controversial practices used by credit card companies. The regulations, which could go into effect by the end of 2008, would:

• Prohibit credit card companies from raising rates on existing credit card balances, unless a payment is at least 30 days overdue
• Force card companies to give at least a 21-day “grace period” before payments are due
• Have customer payments allocated to higher-interest balances first
• Stop subprime credit cards from offering extremely small credit lines that are then mostly used up by the initial fees the card requires
• Make credit card companies disclose what credit factors influence their decisions when offers are made that include differing tiers for interest rates and credit lines
• Make customer payments received by 5PM on the due date considered to be “on time”, and/or, if card companies set due dates when mail is not delivered or business is not conducted, payments would be considered on time if received the next standard business day.

Predictably, consumer advocates generally applauded the proposals while credit card companies and industry associations equated them with price fixing. While the final regulations may differ somewhat from what was proposed Friday—more likely to be watered down than made stronger—it is likely that at least some of these consumer-friendly proposals will be in effect come 2009.

Published 05/05/08 (Modified 04/20/12)