The Office of Thrift Supervision released preliminary rules Thursday that would curb certain credit card practices, but does not go as far as Democrats have called for in their legislation to rein in the trillion-dollar industry.
The OTS would ban the practice known as double-cycle billing, in which an institution assesses interest on the entire amount charged during one month unless the bill was paid in full.
Also under the proposal, if a borrower has a card with balances pegged at different interest rates, the thrift would be prohibited from applying the payment first to the one with the lowest rate.
Under certain conditions, it also would prohibit thrifts from raising the interest rate on outstanding balances. The OTS rule would only apply to thrifts, though the Federal Reserve is expected to release today a preliminary rule that would cover banks, thrifts and credit unions.
Some lawmakers applauded the OTS move, though differed on whether it went far enough.
"I think there are some changes here that protect consumers and simply make sense," said Rep. Michael Castle, R-Del. "Some in the credit industry may find fault with a few minor components but I think it is likely the industry will embrace these changes, as many already have."
House Financial Services Financial Institutions Subcommittee Chairwoman Carolyn Maloney, D-N.Y., said that while the OTS rules were welcome, legislation would be needed to tackle other practices that consumer groups have labeled abusive.
Maloney has sponsored legislation that would ban double-cycle billing as well as other practices such as universal default, in which customers are charged a higher interest rate if they miss a payment on another card or if their credit score drops by a specified amount. "By the time they get around to finalizing these rules, they will be watered down and come too little too late to help struggling consumers," Maloney said.
This article appears in the May 3, 2008 edition of NJ Daily.
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