Regulators Looking To Tighten Rules On Credit Card Practices

May 2, 2008 7:31 p.m. EST

New York, NY (AHN) - The Federal Reserve and banking regulators are proposing new regulations to limit credit card companies from unfairly raising interest rates.

Under the proposal, the $2 trillion industry would be under additional scrutiny for instances of unfair and deceptive practices by the companies.

The seven-point plan was proposed by the Office of Thrift Supervision jointly with the Federal Reserve and National Credit Union Association.

"A year ago, we received a lot of commitments and promises that a lot of these practices would stop, but they haven't," Senate Banking Committee chair Chris Dodd said Wednesday in discussing his bill, according to The Wall Street Journal.

The plan would mainly allow consumers to pay back their monthly bills over a longer period.

It would also stop firms from unfairly applying additional interest rates on the pre-existing balances, unfairly computing balances and making deceptive offers of credit.

"It's a good first step in addressing a number of abusive practices," Travis Plunkett, legislative director at the consumer federation, told CNN Money.

"However, it will still be necessary for Congress to step in because the proposal only deals with a few of the problems that have been identified."

The Fed was scheduled to meet and approve the proposed regulations Friday afternoon.