State Holds Hearing on Tightening Credit Card Lending Practices

Consumer activists at a New York state joint Senate and Assembly hearing on the credit-card industry criticized a number of its common practices.

The credit card industry has been under increased fire recently for practices ranging from increased interest rates for unpaid non-credit card bills (sometimes called “Universal Default”), to subprime lending, to confusing interest rates and fees.

The New York Senate and Assembly are considering legislation that would prohibit "universal default" provisions.  "Under the federal regulatory scheme, states are effectively foreclosed from regulating interest rates of all but a handful of state-chartered institutions," said Matthew Barbaro, an assistant attorney general.

States can take action against credit-card companies that engage in deceptive credit-card solicitations and other practices, but they cannot impose additional disclosure requirements because that, too, comes under federal law, he added.