Shelby Presses Bernanke On Clarity Of Credit Card Bills.

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Author: Swindell, Bill

Finance

Senate Banking Chairman Shelby pressured Federal Reserve Chairman Bernanke today on whether legislation is needed to require banks to more clearly state their interest rate structure on credit card statements mailed to customers. Shelby said during a panel hearing on financial literacy that he is concerned that some consumers are unaware they are not making sufficient progress in lowering their overall balance by paying the minimum amount required. "If you get a credit card bill, the interest [for banks] is on paying the minimum … which is a real problem for a lot of people who lack literacy in financial matters, especially our young people who are heavy in debt for credit card purchases," Shelby said. He asked Bernanke if he supports a requirement that banks state how long it would take for a debt to be paid off if a customer continually paid the minimum balance required on their credit card. Bernanke said the issue is a "real problem," noting that many customers fall into a trap of negative amortization in which the interest on a credit card is being compounded at a rate that does not reduce the overall balance because of the low minimum payments.

Bernanke said the Federal Reserve is working with banks to ensure that they take steps to warn customers to avoid such problems. "Through guidance and supervisory oversight, we have been able to get satisfactory practices from the banks we supervise," Bernanke said. He added that the Federal Reserve is conducting a review of its obligations under the 1968 Truth in Lending Act, to decide if it needs new regulations or to issue additional advisory guidance.

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By Bill Swindell