UPDATE 2-U.S. bank regulators back credit card reforms

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By John Poirier

WASHINGTON, May 2 (Reuters) - The Federal Reserve on Friday joined other U.S. banking regulators in backing new limits on certain billing practices by credit card companies.

The Fed approved a proposal that would generally prohibit credit card companies from increasing the annual percentage rate on a customer's outstanding balance. It would also ban companies from reaching back to prior billing cycles when calculating the amount of interest charges in the current cycle, a practice known as double-cycle billing.

The U.S. Office of Thrift Supervision and National Credit Union Administration already approved the same proposal. All three regulators said they hope to finalize the rule by the end of 2008.

Among the biggest issuers of Visa Inc (V.N: Quote, Profile, Research) and MasterCard Inc (MA.N: Quote, Profile, Research) credit cards are Bank of America Corp (BAC.N: Quote, Profile, Research), JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), Citigroup Inc (C.N: Quote, Profile, Research) (C.N: Quote, Profile, Research), Capital One Financial Corp (COF.N: Quote, Profile, Research) and Discover Financial Services (DFS.N: Quote, Profile, Research).

"The proposed rules are intended to establish a new baseline for fairness in how credit card plans operate," Fed Chairman Ben Bernanke said at a meeting to approve the proposal. "Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs."

The banking industry has fought bills in the Senate and the House of Representatives that aim to limit similar practices.

"Regulatory responses such as these are effectively price controls, which have never worked in the past, and we do not believe they will work here," Edward Yingling, president of the American Bankers Association, said in a statement.