WASHINGTON — The Federal Reserve and other regulators initiated steps Friday to end “unfair and deceptive” credit-card industry practices assailing consumers who are already struggling to cope in a bad economy.
The proposed rules would be the biggest clampdown on the industry in decades, aiming at protecting people from credit-card companies that arbitrarily raise interest rates or don’t give borrowers adequate time to pay their bills.
The proposals also would restrict such lender practices as allocating all payments to balances with lower interest rates when a borrower has balances with different rates. The Fed board voted Friday to approve the recommendations.
Federal Reserve chief Ben Bernanke said the proposed rules “are intended to establish a new baseline for fairness in how credit-card plans operate.”
Consumers “should be better able to predict how their decisions and actions will affect their costs,” he said.
Lawmakers who have demanded tougher controls on the credit-card industry were generally positive about the rules, as were consumer groups.
But some questioned whether the changes would be strong enough and take effect soon enough to help the millions of households struggling with credit-card debt.
“These steps are a significant improvement,” said Sen. Charles Schumer, D-N.Y., a member of the Senate Banking Committee and a leader in legislative efforts to make credit-card companies more forthcoming about their terms. “While they can still go further, the Fed deserves credit for acting, particularly for banning some awful practices rather than relying solely on disclosure.”
The banking industry opposes the changes and says they could lead to higher interest rates. The rules could be finalized by the end of the year.
