National Financial Awareness Network, Inc.
National Financial Awareness Network, Inc.

Consumers Urged to Voice Concerns About Credit Card Practices

Personal finance publishing executive is calling on the public to comment before the August 4 deadline on proposed regulations to curb unfair and abusive practices by credit card companies.

Columbia, MD, July 23, 2008 --( National Financial Awareness Network president John Janney is urging the public to submit comments to the Federal Reserve before August 4 regarding proposed regulations designed to curb unfair and deceptive practices by credit card companies.

The proposed regulations would address long-standing issues that consumers and consumer advocates have been raising for several years. These issues include such controversial practices as universal default, which is raising a cardholder’s interest rate if the cardholder is late paying another bill, and two-cycle billing, which is charging interest on the daily average balance during a two-month instead of a one-month period.

As part of the regulatory process, the Federal Reserve is accepting comments from the general public until August 4 about the proposed regulations. Janney is urging consumers to share their concerns, experiences and suggestions with the Federal Reserve by going to, clicking on the Consumer Information link and then clicking on the Proposed Rules for Credit Cards and Overdraft Services link. The resulting page explains the proposed regulations and offers a link to the comment form under the Proposals for Comment (Regulation AA).

“We really need to speak up,” Janney concluded. “Too many families are suffering from unfair interest rate hikes and other sneaky tricks and this is just adding to the current credit crisis.”

Janney said that one of the major problems facing consumers is what he calls “the disclosure approach” regulators took regarding credit card practices. He said that such an approach does not protect consumers, it only gives a green light to credit card companies to do whatever they want as long as the credit card contract small print or notices inform cardholders of the unfair action.

“You can’t claim to be protecting consumers when all you do is require credit card companies to tell consumers when and how they will be taken advantage of,” Janney explained. “The proposed regulations are long overdue and should go a long way, if they are actually enforced.”

Consumer advocates claim that universal default is unfair because it penalizes cardholders for defaults on accounts not associated with the credit card. For example, some credit card companies will raise the cardholder’s interest rate to as high as 39 percent if the cardholder is late paying a phone bill, even if the cardholder was never late paying the credit card bill. Some credit card companies also use universal default to raise cardholder account interest rates if the cardholder’s credit score lowers by just one point, which can happen due to normal credit use such as credit inquiries or slight balance increases.

“When rates are increased, cardholders get trapped,” explained Janney. “They have no choice but to accept the higher APR or transfer the balance to another card, if they’re lucky enough to have a low-interest offer that doesn’t charge high balance transfer fees.”

Two-cycle billing has also come under fire because it is a technique used by credit card companies to charge interest on balances that cardholders have already paid off. For example, if a cardholder pays off a $500 balance in June and carries a zero balance in July, the credit card company will still charge interest on the daily average balance for those 60 days. Furthermore, two-cycle billing allows credit card companies to charge interest on balances twice because statements are billed monthly while interest calculated on two month’s worth of balances. So, a cardholder will receive a statement in June and be charged interest for May and June and then receive a statement in July and be charge for interest for June and July, causing the cardholder to be charged twice for June.

About NFAN

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National Financial Awareness Network, Inc.
John Janney