Fed’s Credit Card Fee Rules Eye ‘Consumer Conduct’

The Federal Reserve’s newly announced rules restricting fees by credit card issuers focus on “consumer conduct” and what constitutes a reasonable penalty to cover an issuer’s costs. The rules, which includes prohibitions against so-called “inactivity fees,” will take effect August 22, and will mark the final phase of the sweeping set of reform laws known as the Credit CARD Act. The bulk of the legislation took effect Feb. 22.

Dodd: Consumer Agency Needs to be Strong, Independent

Senate Banking Committee Chairman Christopher Dodd, D-Connecticut, said the two parties are still divided on the key financial oversight reform issue of a consumer watchdog agency to oversee credit cards, mortgages and other crucial financial products. But added he was optimistic that a bipartisan deal was possible in coming days.

2nd Fed Official Sheds Doubt on ‘Extended’ Near-Zero Rate

A second Federal Reserve official is on the record as doubting the wisdom of keeping the benchmark interest rate at near zero for an “extended” period of time, as the current policy outlook has stood for several months. St. Louis Federal Reserve Bank President James Bullard told reporters yesterday at St. Cloud State University that he is concerned over the constant reference to a timeline on maintaining the key federal funds rate at 0-.25 percent.

Credit Card Issuers to Be More Accountable for Rate Hikes

In new rules disclosed today, the Federal Reserve is proposing to make credit card issuers more accountable by requiring them to provide as many as four reasons for every interest rate increase.
The Fed may also require rate-hike reviews every six months, but is soliciting comments from the industry that might set a long-term deadline for discontinuing a customer’s ongoing review process.

Fed to Ban Credit Card ‘Inactivity’ Fees, Restrict Other Penalties

In new rules defining “unreasonable” penalty fees under credit card reform laws, the Federal Reserve today proposed prohibiting so-called “inactivity fees” and other fees that exceed the dollar amount associated with the card customer’s violation. The Fed is also requiring card issuers that have increased rates since January 1, 2009 to “evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.”

Fed-Housed Consumer Agency Plan Draws Ire from Both Sides

The proposal to house within the Federal Reserve what was initially an independent consumer protection agency has rekindled outcries from both sides of the debate – consumer advocates on one and business groups on the other. The plan is the closest one to a compromise to emerge and it is not quite off the table. But it still faces difficult hurdles ahead, with the Central Bank’s record in protecting consumers from unfair or predatory practices at the heart of the arguments.

Small Business Lending Still Grim, But Fed Official Hopeful

Bank loans to small businesses continue to deteriorate, and some lenders don’t anticipate much improvement for the rest of the year, according to prepared testimony by Federal Reserve Governor Elizabeth Duke. But Duke said she is “somewhat optimistic” that the tightening of credit is close to an end, and lending to small businesses will see increases later in the year — based on “some momentum” in spending by businesses and households, and the overall upswing in the equity markets.

“…Bank attitudes toward lending, including small business lending, may

Bernanke: No Rate Hike for Now; Welcomes ‘Review’

Federal Reserve Chairman Ben Bernanke assured Congress and the public today that record-low interest rates will remain in place to bolster moderate economic growth and what is likely a slow improvement in the unemployment rate. Speaking before the House Financial Services Committee, Bernanke reiterated his non-specific timetable for a possible resumption of rate increases on the key federal funds rate – the overnight interbank borrowing rate – which has been at 0-.25 since December 2008. He also conceded that some may question the Fed’s use of emergency authority in propping up the financial markets during the crisis, and welcomed a review of the central bank’s “management” of that authority.

Fed Close to Ending Overdraft-Fee Traps on Debit Cards, ATM

In the coming months, financial institutions will start providing consumers with notices on overdraft services, primarily the choice to “opt-in” before you can be hit with overdraft fees for ATM and one-time debit card transactions. If they don’t for new customers starting July 1, 2010, they will be in trouble with the Federal Reserve. The regulator and rule-making authority on protecting consumers from unreasonable bank fees is putting out the word through a new web page. Banks, credit unions, and other financial institutions will be prohibited from charging overdraft fees for ATM and one-time debit card transactions, unless a customer consents. For existing customers, the institutions have until August 15 to comply.

‘Ability to Pay’ Now the Rule in Credit Card Laws

With reform comes major new challenges to credit card issuers who project significant revenue losses from compliance with the Credit CARD Act taking effect today, and one of the bigger hurdles may be a consumer’s “ability to pay.” This rule may have the unwelcome effect of making it harder for some consumers to obtain cards at a time when credit availability remains tight. Previously, card applicants only disclosed their income, and most issuers didn’t ask for verification.

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