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Trouble Implementing Credit Card Reforms

November 25, 2009 - by Donny Shaw

The bill Congress passed earlier this year to protect consumers from “unfair and deceptive” practices by credit card companies (H.R.627) isn’t scheduled to go into effect until February. But the rule for implementing the bill has already been released, and credit card companies are preparing for the bill by developing new interest rate mechanisms that will let them continue being unfair and deceptive while being technically in compliance with the law . The new mechanism being developed include things like “hybrid fixed-variable interest rates” and “interest rate rebates.” Huh? Exactly.

In a somewhat rare move, Sen. Carl Levin [D, MI] sent a letter to the Federal Reserve this week urging them to tweak the rule they have promulgated for implementing the bill so that it’s not so easily worked around by the card companies. Specifically, Levin suggested that the Fed add “anti-evasion” language to their rules along these lines:

“A creditor may not employ any credit card interest rate or fee structure, grace period restriction, minimum payment requirement, account closing mechanism, disclosure practice, rebate, or other device or practice that would evade, circumvent, or undermine the effectiveness of the consumer protections established by the CARD Act or this rule.”

Of course, this language also could have been added to the bill included by Congress. It just goes to show (a) that there is still some flex in the law-making process even after a bill has been signed into law and (b) the world’s most powerful financial corporations can often overcome the piecemeal regulations that Congress manages to pass.

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