Connecticut Attorney General's Office

Press Release

Attorney General Blasts Fed For Failing To Meet Deadline For Rules To Roll Back Credit Card Interest Rate, Fee Increases

February 22, 2010

        Attorney General Richard Blumenthal today demanded that the U. S. Federal Reserve explain why it failed to meet today’s deadline for rules to roll back massive, unjustified credit card interest rate and fee increases and provide a timeframe for issuing the regulations.

“The Fed’s failure to meet a deadline vital to consumers facing billions in unjustified and arbitrary interest payments is inexplicable and inexcusable,” Blumenthal said. “The Fed never misses a deadline important to big banks, but it fails without explanation or apology to issue on time rules critical to consumers.

“The Fed’s failure to act demonstrates a disturbing disdain for ordinary consumers -- and Congress. Too often, the public perceives the Fed’s philosophy as billions for bankers, crumbs for consumers.

“I will demand that Chairman Bernanke provide an explanation for the Fed’s failure to issue regulations enabling roll backs of huge interest rate increases on credit worthy consumers and set forth a timeframe for doing so. I will fight to reverse these hikes, which banks admit are intended to pay for their own monumental mistakes.

“The Fed has failed to use its robust consumer protection powers -- even as bankers benefiting from billions in bailouts gouge the very taxpayers who rescued them. It’s long past time for the Fed to stop coddling bonus-bloated bankers and start fighting for cash-strapped consumers.”

        The Credit Card Accountability Responsibility and Disclosure Act (CARD Act) of 2009 empowers the Fed to review and order roll backs of unjustified credit card interest rate and fee increases imposed since January 1, 2009. Under the law, the Fed was supposed to issue rules today determining what rate and fee hikes would be eligible for reversal starting in August.

        The Fed has not said publicly why it missed the deadline or when it will issue rules.

        Blumenthal wrote Federal Reserve Chairman Ben S. Bernanke several times since December urging him to write the rules so they compel roll backs of interest rate hikes on credit worthy consumers, some of whom saw rates double to as high as 30 percent.

        Blumenthal, meanwhile, praised the CARD Act, which goes into effect today, but warned consumers that loopholes remain and urged Congress to close them.

He said, “Starting today, consumers have stronger shield against credit card abuses, including unjustified interest rate increases on existing balances, double cycle billing and deceptive language. These rules offer consumers protection from unconscionable credit card company practices that seek to trap them on a treadmill of debt.

“Consumers must beware that gaping loopholes remain. Credit card issuers can still increase your rate on new balances, although they must give 45 days’ notice. They can still create junk fees, phony charges for low usage, foreign transactions, balance transfers and paper statements. Consumers should watch their cards carefully and dump issuers who create new ways to gouge them.

“I will fight to close these loopholes, assuring card issuers treat their customers fairly and honestly,” Blumenthal said.

Blumenthal proposed:

·         Imposing stricter limits on mandatory charges such as annual and application fees which now can be as high as 25% of the cardholder’s credit limit. 

·         Prohibiting consumer-initiated cancellation of a card from harming consumers’ credit scores. The notice and “opt-out” provisions of the CARD Act won’t help consumers if they hurt their credit scores.

·         Apply the same “reasonable” standard restricting penalty fees to non-penalty fees. Most consumer watchdogs expect banks to start imposing new garbage fees, such as paper statement fees, dormancy fees, low usage fees, foreign transaction fees, balance transfer fees, cash advance fees.  Those fees are unrestricted under the Card Act.

·         Apply the CARD Act to cards issued to small businesses.