Proposed Credit Card Rule Changes Get High Profile Comments on Last Day

In the final day of public commentary, some credit card issuers blasted a proposed regulatory shift designed to end what regulators term as deceptive practices. The proposals were backed by a prominent lawmaker in another last minute comment.

In May, the Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration issued proposed rules that would, under the Federal Trade Commission Act, attempt to address unfair or deceptive practices for credit card accounts and overdraft protection plans ("Regulators Propose Credit Card Rule Changes," May 2).

The proposed regulation changes are preferred by the American Bankers Association over “The Credit Cardholders’ Bill of Rights” legislation, designed to limit interest rate increases and fees as well as some billing and payment practices. The bill, HR 5244, has passed committee and is awaiting full House consideration (“Consumer-Friendly Credit Card Bill Passes House Committee,” Aug. 1).

Despite the ABA’s tacit endorsement, JPMorgan Chase rebutted many of the proposals in a letter sent to regulators earlier this week. In its 33-page letter, Chase said that the proposals were "likely to have profound effects on Chase’s operations and financial results."

The bank said that the proposed regulation would result in $10.6 billion in interest losses to banks per year. If banks were to offset the potential losses, it could result in an increase of 12 percent in annual interest rates, a $1.1 trillion reduction in current outstanding credit lines to consumers, or the failure to extend some $11 billion per year in new credit to consumers at the bottom of the credit rating scale.

Chase based its figures on a survey a law firm conducted among several banks (including Chase).

While Chase argued against the proposed rule, Sen. Carl Levin (D-Mich.) said stronger consumer protection is necessary. In a letter to regulators Monday, he urged the Federal Reserve to strengthen its proposed regulation aimed at unfair or deceptive credit card practices.

“Stronger consumer protections and clearer prohibitions against unfair and deceptive credit card lending practices are long overdue,” Levin wrote. “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.”