WASHINGTON -- The U.S. Office of Thrift Supervision on Thursday approved a plan to limit what it called "unfair or deceptive" billing practices by credit card companies.
The proposal would generally prohibit credit card companies from increasing the annual percentage rate on a customer's outstanding balance, the OTS said in a statement.
It would also ban companies from reaching back to the prior billing cycle when calculating the amount of interest charges, a practice known as double-cycle billing.
"Today's proposal addresses practices that have raised concern about fairness and transparency," the OTS said, adding that it would bar thrifts it regulates from "engaging in unfair or deceptive acts or practices" with credit cards.
While the OTS rules affect only savings and loans, the proposal is also supported by the other federal agencies that regulate credit cards issued by both banks and credit unions -- the Federal Reserve and the National Credit Union Administration.
Story Continues Below
The NCUA, which regulates federal credit unions, also approved the proposals on Thursday, and the Federal Reserve Board is expected to approve the proposal on Friday.
The three agencies aim to finalize the rule by the end of 2008, subject to comment from the public and industry and consumer groups, the OTS said.
Among the biggest issuers of Visa Inc and MasterCard Inc credit cards are Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc, Capital One Financial Corp, and Discover Financial Services.
The banking industry has fought bills in the Senate and the House of Representatives that aim to limit similar practices.
Banking lobbyists say changes could result in "unintended consequences" such as higher costs for credit card holders, including those who manage their credit well.
Rep. Carolyn Maloney, a New York Democrat, supported the OTS action and urged other lawmakers to act quickly to move credit card reform legislation through Congress.
"By the time they get around to finalizing these rules, they will be watered down and come too little too late to help struggling consumers," said Maloney, who has also introduced credit card reform legislation.
In recent months, a number of U.S. lawmakers have criticized credit card billing and marketing policies that they say blindside unsuspecting cardholders who become trapped by a mountain of exorbitant fees.
The Senate's Permanent Subcommittee on Investigations last year found some credit companies charged rates as high as 30 percent and that card holders had trouble getting a clear answer about why their rates were raised.
At the moment, Congress is largely focused on helping troubled homeowners and has little time left on the legislative calendar this year to push through credit card reforms.
In response to congressional pressure, the OTS and other banking regulators last August began looking at how to rein in such practices.
The proposal approved by the OTS would also bar thrifts from assessing a fee for paying an overdraft on a checking account, debit card purchase or ATM withdrawal unless they give consumers the right to opt out of overdraft payments.
After all three federal agencies approve the proposals, the public will have 75 days to comment.
© Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters.
Editor's note:
Great Buying Opportunity Ahead for Real Estate. Find Out Where and When
Why Oil Prices Will Go Much Lower After November Election. Best Ways to Profit Now.
Financial Intelligence Report Stock Picks Soaring. Up 53% to 63%!
The Recession's Silver Lining. What it Means for Investors.
