The Federal Reserve Bank on Friday proposed rules which it says will protect consumers from unfair practices regarding their credit cards and bank overdraft services.
The proposed rules are intended to establish a new baseline for fairness in how credit card plans operate, said Federal Reserve Chairman Ben S. Bernanke. Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs.
One of the rules would protect consumers from unexpected increases in the rate charged on their pre-existing credit card balances.
Another would prohibit banks from charging interest rates using the two-cycle billing method, which charges interest rates on days in billing cycles before the most recent billing cycle.
Payment allocations that maximize interest charges, would also be prohibited.
A bank overdraft rule require banks to give customers a notice and an opportunity to opt out of the payment of overdrafts, before any overdraft fees or charges may be imposed on the customers' accounts.
There is a period of 75 days for public comment regarding the proposals for unfair and deceptive practices. The overdraft proposals have a 60 day public comment period.
The head of the American Bankers Association on Friday said in a released statement that the proposal is an unprecedented regulatory intrusion into marketplace pricing and product offerings.
Regulatory responses such as these are effectively price controls, which have never worked in the past, and we do not believe they will work here, said Edwar Yingling, president of the American Bankers Association.