Federal Reserve Drafts New Credit Card Rules

The Federal Reserve is reportedly putting together its own rules to tackle unfair and misleading credit card practices, according to the Washington Post.

Per the article, things like arbitrary interest-rate increases and two-cycle billing are on the agenda.

Discover is currently the number one purveyor of the two-cycle billing method, which can lead to significantly higher finance charges.

The new rules would also force credit card issuers to better disclose terms and conditions to cardholders, ideally not buried in the small print.

In recent months, some credit card issuers have eliminated universal default, but at the same time, raised the cost of late fees and balance transfer fees.

But things like negative payment hierarchy, the practice of paying off the lowest APR charges followed by the highest interest charges, should be addressed as well.

Credit card issuers have long been scrutinized for their seemingly unfair practices, including the latest move by many to fix interest rates as rates continue to fall.

It seems card issuers are constantly devising ways to trap unknowing borrowers, and hopefully the move by the Fed will address some of those issues.

As expected, several card issuers have already warned that new restrictions could hurt all borrowers by raising associated costs and interest rates.

Only time will tell if any meaningful changes come about from all the proposed legislation.

Source: Federal Reserve to Propose New Credit Card Rules