Senate calls on Fed to alter CARD Act

While the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 increased the level of protection consumers have against high late fees on credit cards, confusing billing systems, and arbitrary APR hikes, some Washington lawmakers say that this does not go far enough, and are encouraging further reforms on the part of the Federal Reserve.

On July 20, 2010, Senate members Tom Harkin (D-Iowa) and Charles Schumer (D-New York) called upon the Federal Reserve to make alterations to recently passed rules, which are set to take effect Aug. 22. Under the current standards set forth by the CARD Act and the Federal Reserve, credit card-issuing banks cannot charge more than $25 in fees for late payments unless the consumer has a previous late payment in the past 6 months, and are not allowed to charge inactivity fees or make multiple fees on a single transaction.

However, as Harkin and Schumer pointed out in a letter to Federal Reserve Chairman Ben Bernanke, these regulations do not actually do anything to prevent banks from increasing interest rates for late payments, and theoretically, banks could double or triple interest rates charged to consumers over time. While consumers do have to be notified 45 days ahead of time when their interest rates are being increased, and must be provided a reason as to why, there is no current way for banks to be limited by how much they choose to increase the APR on a given card.

While the Federal Reserve has, so far, not commented on this request for additional consumer protection, Harkin and Schumer state that they will attempt to pass legislation requiring limitations on APR hikes if the Fed does not act.

-Seth Berger