Cryptic interest fees gouge consumers

Dirty tricks once used by a handful of unscrupulous credit card companies are becoming standard operating procedure in the financial industry.

A third of all credit companies hammer their customers with double-cycle billings. If a customer pays $400 of an $800 balance, for example, he or she can be charged interest on the total amount, not just the unpaid portion. More and more banks are adopting universal default rules that allow them to bump up interest rates on credit card customers who have reliably paid off their charges for years but missed a payment to an unrelated lending institution.

New fees and interest rates as high as 30 percent are cropping up like crab grass.

The Federal Reserve, which regulates credit and banking practices, has done little to address these practices other than require lenders to mail out inscrutable "consumer disclosure" pamphlets. But now, with Congress bailing out the investment and mortgage finance industry from its real estate losses, federal leaders are starting to pay attention. Both the Federal Reserve and Congress are considering bans on double-cycle billing and universal default policies. A bill endorsed by the House Financial Services Committee last week also would require a 45-day notice for interest rate increases.

This fall's elections make it unlikely Congress will act this year, so the Federal Reserve, which received 12,000 comments on the regulations, must keep the reforms alive until next year. One Henrico County man whose credit cards are charging him rates as high as 29.99 percent wrote, "It seems I'll be out of debt, at the rate I'm going, when I'm 89 or when I'm dead, which ever comes first (I'm 59 now)."

Lending institutions are feeling the pinch of a weak economy, but allowing them to ratchet up their revenues by burying their customers in debt is not a viable path to financial recovery. The Federal Reserve should step in and end these unjust practices now.