Levin Urges Fed to Strengthen Proposed Credit Card Regulation

“Stronger consumer protections and clearer prohibitions against unfair and deceptive credit card lending practices are long overdue,” Levin said. “The credit card industry today is rife with unfair, deceptive, and predatory practices. The proposed rule would put an end to some of these abusive practices. Unless expanded, however, the proposed rule would leave untouched some of the most blatantly unfair credit card practices in existence today.”

Since 2005, the Permanent Subcommittee on Investigations has been conducting an ongoing, extensive inquiry into unfair credit card practices. Levin chaired two hearings in March and December 2007 highlighting case histories of abusive credit card practices including excessive and duplicative fees, interest charges for debt paid on time, interest rates as high as 32%, unfair allocation of credit card payments, and unfair interest rate hikes.

Levin’s letter lists several areas where the Federal Reserve needs to strengthen its proposed rule including prohibiting the charging of interest on credit card debt that is paid on time, charging interest on fees, hiking interest rates based upon universal default practices, imposing “pay-to-pay” fees, and charging consumers with closed accounts more than three times the amount of debt created by their purchases.

Levin’s letter highlights a case history involving Charles McClune, a 51-year-old Michigan resident who for more than ten years has been trying to pay off a credit card account he closed in 1998. Due to excessive fees and interest rates exceeding 29%, and despite paying more than four times his original credit card debt of less than $4,000, Mr. McClune still owes $3,300. His credit card statements show that, since 2001, he was socked with $9,700 in interest charges, $2,200 in over-the-limit fees, $2,000 in late fees, and $160 in “pay-to-pay” fees; all assessed by Chase Bank while the account was closed. Mr. McClune has not made a single purchase on his credit card since 1995, but he is still paying.