Hope on credit card abuses

As I noted in an earlier post, for many families credit card debt (and bankruptcy) have a lot more to do with medical expenses, unemployment, or divorce than with expensive vacations and plasma TVs. In 2005, a new bankruptcy law made it much more difficult to erase credit card debt. In an effort to keep credit card debt from blowing up into a national disaster on the scale of subprime mortgages, the Federal Reserve and both houses of Congress have been working to rein in some of the excesses of the credit card lenders. This is from the New York Times: 

The House and Senate bills as well as the Federal Reserve require that lenders apply payments to the debt with the highest interest rate. All would ban “double cycle” billing, in which interest is charged on some already repaid debt, and all would extend the time required, currently 14 days, between a statement mailing date and payment due date.

All the measures would, under various conditions, prohibit lenders from raising interest rates on existing debt. The central bank proposes that except for increases caused by changes in stated variable and introductory offers, lenders may increase interest rates only if minimum payments are more than 30 days late.

The recommendations don’t seem to include a ban on “universal default,” under which a single late payment — or a number of other factors — can cause a customer’s interest rate to shoot up on all of his or her credit cards, plus mortgages and auto loans.