WASHINGTON - Federal disclosure rules taking effect
today will make it easier to shop for a credit card, fostering
competition that could lower interest rates for the nation's 107
The regulations, adopted in April by the Federal Reserve Board,
require credit card issuers to disclose the interest rate, monthly
fee, grace period and other terms in a chart on the application used
to sign up customers.
Until now, companies have been able to attract customers through
hyped-up advertisements and mail solicitations, without disclosing
the card's costs until it arrived in the mail.
Hype and glitz are still permissible, but now will have to be
accompanied by hard facts.
``The ball is now clearly in the consumer's court. There will
be big-print, up-front disclosure,'' said Rep. Charles Schumer,
D-N.Y., the sponsor of legislation adopted last October which
directed the Fed to formulate the disclosure rules.
The rules apply to bank cards, such as Visa, MasterCard and
Discover; to department store cards; and also to charge cards,
such as American Express and Diners Club, which require all charges
to be paid each month.
``Companies that were using gimmicks to hide their high rates
can't now,'' said Peggy Miller, a lobbyist for the Consumer
Federation of America. ``I'm very hopeful that this will at least
provide the edge to consumers to make better judgments.''
Consumer activists are hoping the regulations will force credit
card companies to compete by lowering their interest rates and
annual fees. But Robert B. McKinley, publisher and editor of RAM
Research's Bankcard Update, a Frederick, Md., newsletter that
follows the industry, has doubts.
Competition has increased in the past several years, but rates
are still high, even in the dozen or so states such as California
and New York which have their own disclosure laws, he said.
Nationally, cards offered by banks had average interest rates of
18.28 percent in August and an average annual fee of $16.97,
One reason is the growing concentration of the industry as large
institutions buy out smaller credit card operations, he said.
Another is that consumers don't appear to pay much attention to
interest rates, even when card companies disclose them.
Economists attribute the indifference in part to the fact that
most people intend to pay off their entire bill each month, avoiding
interest charges. But a substantial portion don't follow through on
their good intentions.
Credit card rates first became a political issue in the early
1980s when short-term interest rates soared above 20 percent.
Consumer groups sought disclosure rules and federal caps on the
rates, but made little headway until they dropped their demand for