- The Washington Times - Friday, February 13, 2009

NEW YORK | Swiping your credit card would come with dramatic new protections under regulations considered by congressional lawmakers Thursday.

Among the industry practices criticized at the Senate Banking, Housing, and Urban Affairs Committee’s hearing was the piling on of hidden fees on consumers. Fees can be incurred for telephone payments, balance transfers, replacing lost cards and cash advances. Card issuers can also hike interest rates for a variety of reasons.

“The list of questionable actions credit card companies are engaged in is lengthy and disturbing,” said Sen. Christopher J. Dodd, chairman of the banking committee.

Any new regulations would be in addition to a sweeping clampdown on the industry already adopted by the Federal Reserve late last year. Those rules, which take effect in July 2010, shield consumers from arbitrary interest rate hikes and inadequate time to pay bills.

In addition, consumers will have to be given 45 days notice before any changes are made to the terms of an account. Under current rules, companies in most cases give 15 days notice before making certain changes.

A payment could also not be deemed late unless the borrower is given a reasonable period of time, such as 21 days, to pay.

Legislation introduced Wednesday by Mr. Dodd and Sen. Carl Levin, Michigan Democrat, would also:

• Prohibit credit card companies from charging interest on penalty fees;

• Prohibit charging consumers to pay bills via mail or telephone;

• Require card issuers to lower penalty interest rates if no further violations occur after six months;

• Require issuers soliciting anyone under 21 to get the signature of the parent or guardian who will co-sign for debt.

Scrutiny of the industry comes at a time when consumers are defaulting at high levels on credit card bills.

Last month, Fitch Ratings said its index of charge-offs on prime credit card portfolios rose in December to its highest level in four years. The rate at which cardholders repaid outstanding balances, meanwhile, slowed to its lowest since mid-2004.

Charge-offs are loans written off as not being repaid.

The current economic climate and President Obama’s new administration mean proponents are seeing better prospects for greater oversight of the financial services industry.

But given the reforms already adopted in December, some at the hearing Thursday urged caution in imposing additional regulations.

“We need to be careful not to take action that would limit credit,” said Sen. Richard C. Shelby, Alabama Republican.

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