Going after Unfair and Deceptive Practices: It's About Time

Credit is a critical element to asset building, but credit that is badly structured, difficult to understand, or abusive generally results in the destruction of assets, not their creation. Credit cards and overdraft protection programs have often shared these characteristics-and the asset stripping results.

On Friday, bank regulators will release proposed regulations under Section 18 of the Federal Trade Commission Act concerning unfair and deceptive acts and practices (UDAP). The proposal will apparently be a joint release by the three agencies that have jurisdiction to write rules under the Act, the Federal Reserve, the Office of Thrift Supervision, and the National Credit Union Administration. This will be a rare instance of the agencies exercising rule-making, in contrast to enforcement, authority under the statute.

The proposal, which is expected to cover both credit cards and bounce protection, would require major improvements in practices, including generally limiting credit card interest rate increases to new balances, requiring opportunities to opt out of bounce protection, and prohibiting overdraft and overlimit fees that arise because of holds on debit or credit card purchases. While there will be objections from both the industry-asserting the proposed rules stifle competition-and consumer advocates-arguing that they do not go far enough-this is an extremely welcome development, one long overdue. The agencies have said they intend to make the rules final by the end of the year.

The 75-day comment period will coincide with both Congressional and electoral activity. And of course, year end will be a time of transition no matter who wins the election. It has taken a very long time to get this far; it's important that the regulators finish the job, and finish it strongly.