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Published: Saturday, 12/27/2008

Where credit is due

CALL it the gift that should keep on giving: Federal regulators finally are doing something about unreasonable credit card terms that shackle consumers in a virtual debtor's prison. Unfortunately, it won't happen until mid-2010.

Most notably, the new regulations will prohibit card issuers from suddenly raising the interest rate on current balances. Rules like that make even loan sharks blush, but they're a primary reason cardholders in this country have racked up debt of some $850 billion, four times the amount in 1990.

We don't excuse consumers who willingly put more on plastic than they can afford to pay. Still, abuses have mounted as the 16,000 banks and other financial services companies that issue credit cards in the United States have relentlessly devised ways to legally gouge their customers.

When the rules take effect in 18 months, gone will be such sneaky tactics as double-cycle billing, which allows companies to unfairly jack up balances owed; adding so-called security deposits and fees simply for issuing credit, and ultrashort time constraints on late payments.

Lenders also will be prohibited from automatically allocating payments to balances with the lowest interest rates in cases where cardholders carry balances of varying rates. The changes should ease pressure on consumers who struggle to pay their bills only to fall further into debt by a succession of arbitrary and escalating rates and fees.

The rules were adopted by the Federal Reserve; the Office of Thrift Supervision at the Treasury Department, and the National Credit Union Administration.

Fed chairman Ben Bernanke calls the revisions "the most comprehensive and sweeping reforms ever adopted for credit card accounts." And while it's also true that they won't outlaw all of the predatory practices lenders still have in their repertories, the changes are welcome.

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