The proposed rules would be the biggest clampdown on the industry in decades, aiming at protecting people from credit card companies that arbitrarily raise interest rates or don't give borrowers adequate time to pay their bills.
The proposals would also restrict such lender practices as allocating all payments to balances with lower interest rates when a borrower has balances with different rates. The Fed board voted Friday to approve the recommendations.
The proposed new rules would prohibit:
_Placing unfair time constraints on payments. A payment could not be deemed late unless the borrower is given a reasonable period of time, such as 21 days, to pay;
_Unfairly allocating payments among balances with different interest rates, with lenders crediting payments to balances with lower rates so they can continue to charge interest for balances at higher rates;
_Retroactively raising interest rates on pre-existing balances;
_Placing too-high fees for exceeding the credit limit solely because of a hold placed on the account;
_Unfairly computing balances in a computing tactic known as double-cycle billing;
_Unfairly adding security deposits and fees for issuing credit or making credit available;
_Making deceptive offers of credit.
The agencies said the proposed rules also would require federal credit unions to give consumers a chance to opt out of an overdraft protection program. And they would prohibit those institutions from charging a fee for an overdraft caused by a hold placed on consumer's funds when a person uses a debit card.
The Consumer Federation of America estimates that credit card debt held by consumers is about $850 billion, some four times what it was in 1990. The group says the average debt for those 58 percent of card-holding households that do not pay their balance in full every month is about $17,000.
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