May 5, 2009 / 4:47 PM / 8 years ago

Fed rejects request to help credit card holders

WASHINGTON (Reuters) - The Federal Reserve rejected a request to force credit card companies to immediately halt retroactive interest-rate increases on existing balances, Democratic Senator Charles Schumer said on Tuesday.

Schumer and Christopher Dodd, who chairs the Senate Banking Committee, asked the Fed last month to use its emergency powers for rescuing banks to also help credit card consumers being slapped with unexpected rate increases.

"The Federal Reserve's failure to protect consumers from these outrageous rate increases is unconscionable," Schumer said.

"The Fed has acted swiftly to use its emergency powers to steady teetering financial institutions. It is fair to ask why they won't use the same powers to aid American families who are at just as great a risk."

A Fed spokeswoman could not immediately be reached for comment.

Banks such as Bank of America Corp, JPMorgan Chase, Citigroup Inc and Capital One Financial Corp face a new set of Fed rules aimed at reining in abusive credit card practices. The rules are to be implemented by July 2010, a date some lawmakers and consumer groups complain is too far away to help struggling consumers.

U.S. lawmakers are trying to codify those rules in legislation. With support from President Barack Obama, the Senate could vote on a credit card measure within days if Dodd and Richard Shelby, the banking committee's top Republican, can agree on language for a final bill.

The House of Representatives overwhelmingly approved its own legislation last month. Lawmakers are trying to get a final bill to Obama to sign into law by the end of the month.

In 2007, Americans used an estimated 694.4 million credit cards with Visa Inc, MasterCard Inc, American Express Co and Discover Financial Services logos, according to industry data.

Reporting by John Poirier; Editing by Steve Orlofsky

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