Upcoming Fed Vote Could Remake Credit Card Regulations

The Fed will vote Thursday on a proposal which will ban practices such as retroactively raising interest rates and not giving consumers a reasonable amount of time to make payments. It represents the biggest overhaul of the credit card industry to occur in decades.

Among the many provisions is a ban on raising interest rates on existing balances unless the customer was 30 days or more late in paying the minimum. Other circumstances in which a rate change would be allowed would be if the card had a variable rate or a promotional rate that was set to expire. Banks would also not be able to treat a payment as late if the customer had not been given a fair amount of time to make that payment.

The proposal would also dictate how credit card companies should apply customers' payments that exceed the minimum required each month. When different annual percentage rates apply to different balances on the same card, banks would be prohibited from applying the entire amount to the balance with the lowest rate. Many card issuers do that so that debts with the highest interest rates linger the longest, thereby costing the consumer more.

Of course, the credit card industry has lobbied against these changes, and claim that if they are implemented, they will have to jack up everybody's interest rates, not just those who get behind--an obvious attempt to punish consumers for daring to question their usurious practices.

While the measure, as written, won't ban all of the deceptive and dishonest practices of the credit card industry, at least it's a start.