recreatingreality.com

At last, the Fed has realized a need to protect consumers from credit card banks.  But, don’t become overjoyed or expect credit to flow freely.  For some consumers this will be seen as a blessing.  For others, the credit available will shrink dramatically.

The following is a statement by Edward L. Yingling, President and CEO of American Bankers Association:

“The strong new regulations announced today by the Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration are unprecedented in their scope and signal the beginning of a new market structure for credit cards.

“In seeking to address concerns expressed by policymakers and consumers, the Fed has severely restricted or prohibited card issuers from engaging in certain practices such as ‘universal default,’ ‘double-cycle billing,’ and raising interest rates on existing balances. The basic principles contained in many legislative proposals are reflected in these regulations.

“The disclosure requirements, which are the result of several years of consumer testing undertaken by the Fed, are a dramatic improvement over the existing legalistic disclosures. The new regulations will fundamentally alter the relationship that cardholders have with their banks and the way that banks communicate with cardholders.

“The new disclosure rules ensure that the most important — and potentially most costly — parts of a cardholder’s agreement are highlighted and in easy to understand language. This will give consumers the ability to easily compare the terms of different credit cards and make more informed decisions about their personal finances.

“While the new rules are designed to increase protections for consumers, the Fed itself has recognized that they may result in increased costs for most card users and reduced credit availability, particularly for consumers with lower credit scores or limited credit history. With the uncertainty facing our financial system, it’s absolutely vital for policymakers to understand the full impact of these regulations on consumers and the economy before judging their success or further restricting the marketplace.

“An overhaul of the market for credit cards of this magnitude will require time for full implementation, and we are committed to working with the Fed and other regulators to make these regulations work for consumers and small businesses.”