Bernanke Comments on Unfair Credit Card, Overdraft Practices
In his Semiannual Monetary Policy Report to the Congress today, Federal Reserve Chairman Ben S. Bernanke concluded his remarks by discussing the rules that the Federal Reserve working jointly with the Office of Thrift Supervision and the National Credit Union Administration have proposed regarding unfair or deceptive practices for credit card accounts and overdraft protection plans.
Benanke commented:
"Credit cards provide a convenient source of credit for many consumers, but the terms of credit card loans have become more complex, which has reduced transparency. Our consumer testing has persuaded us that disclosures alone cannot solve this problem. Thus, the Board's proposed rules would require card issuers to alter their practices in ways that will allow consumers to better understand how their own decisions and actions will affect their costs. Card issuers would be prohibited from increasing interest rates retroactively to cover prior purchases except under very limited circumstances. For accounts having multiple interest rates, when consumers seek to pay down their balance by paying more than the minimum, card issuers would be prohibited from maximizing interest charges by applying excess payments to the lowest rate balance first. The proposed rules dealing with bank overdraft services seek to give consumers greater control by ensuring that they have ample opportunity to opt out of automatic payments of overdrafts. The Board has already received more than 20,000 comment letters in response to the proposed rules."
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