By Joseph S. Enoch

July 24, 2008

More than 30,000 consumers have deluged the Federal Reserve Board's public comment system with opinions on the agency's upcoming proposed rulemaking that addresses abusive credit card practices, according to the Consumer Federation of America.

"The federal regulators have gotten the message from consumers that the banks are using unfair practices to make bad money on top of good money," Ed Mierzwinski, consumer program director for the not-for-profit consumer advocacy group U.S. Public Interest Research Group, said in an older prepared statement. "These rules will ban some of the unfair tactics that hurt American families."

The proposed rules are the first of their kind, said Travis Plunkett, legislative director for the not-for-profit Consumer Federation of America.

"This is the first time ever that a federal agency or Congress have decided to reign in the questionable credit card industry practices," Plunkett said.

Among the 12 items in the proposal are rules that would: prohibit rate increases to existing balances, increase the payment period, prohibit two-cycle billing and adjust the allocation of payments so that in the instance a consumer has two balances with a credit card company, the creditor cannot apply payments solely to the balance with the lower interest rate.

First step

"It's a good first step ... but there are a whole host of problems in the credit card market that are not addressed," Plunkett said. "For instance, reckless extension of credit to young people, to college students in particular, (and) high fees or fees that are assessed unfairly."

Some other credit abuses, such as the prevalence of extending credit to college students, have supporting legislation pending in Congress.

Although this is the first move of this kind by the government, Plunkett said last year the Federal Reserve implemented new rules to help educate consumers on credit abuses.

"They are improving credit card disclosures," Plunkett said. "But if the practice is abusive, merely telling somebody about it before you do it is not fair.

"Certain practices are by definition unfair and deceptive and should be restricted and prohibited and the Federal Reserve has finally come to that conclusion."

Personal pleas

Of the 30,000 comments, more than 12,000 are personal pleas from consumers acting on their own while about 19,000 other Americans have submitted form letters distributed by consumer advocacy groups and the credit industry.

This is the second largest number of public comments the Federal Reserve has ever received, trailing the reform of the mortgage brokers, Plunkett said.

The public comment period ends August 4, 2008.

Consumers who wish to air their grievances with the Federal Reserve can do so by e-mailing directly to and mentioning Docket No. R-1314 in the subject line.

The Board hopes to finalize the rulemaking by the end of the year, Plunkett said.

Although the outpouring of support for the rules is positive, Plunkett said the rules are far from law.

"They're under enormous pressure from the credit card companies to make this a weaker rule," he said.

Citibank, which has been at the center of many Congressional hearings for its abusive practices, did not return a phone call seeking comment.