New credit card rules protect consumers


Melissa Thomas, a credit card user, is a victim of what's commonly called "rate jacking". She had a small business credit card through Advanta.

"I checked my balance last month and it jumped from 9.99 percent to 28.34 percent," said Thomas.

The Federal Reserve has joined other agencies in putting a stop to that and other abusive credit card practices. Advocates at Consumer Action in San Francisco say sweeping new provisions will rein in excessive interest rate hikes and fees.

"Overall this is outstanding news for consumers. For many years credit card companies have been given a license to steal and today the Federal Reserve indicated that license will be revoked," said Joseph Rideout from Consumer Action.

The new rules range from giving consumers more time to pay their bills to requiring specific and easy to read policies. There are also a couple of key items. For example, banks won't be able to arbitrarily raise rates on credit card debt and they're forced to eliminate that common practice of universal default. That's where if you fall behind on some other bill, your credit card rate shoots up too.

Chris Norlander, a credit card user, applauds the Fed action. He too was a victim of rate jacking.

"You know I have a good credit score, never missed a payment with them so what's the point of raising it? It was pretty outrageous," said Norlander.

People who miss payments or go over credit limits can still face penalties, but the rules limit the overall scope of fees.

The American Bankers Association responded to the new regulations by saying in part "The Fed itself has recognized that they may result in increased costs for most credit card users and reduced credit availability."

The new rules won't take effect until July of 2010. Many consumer advocates say that delay is too long and just leaves consumers like Thomas and Norlander vulnerable for another 18 months.

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