PATON: Colorado official urges credit-card protections

By James Paton, Rocky Mountain News (Contact)

Published August 12, 2008 at 7:55 p.m.

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Rico Munn, director of the state agency that regulates a wide variety of Colorado businesses, is the latest to sound off on credit-card company practices.

"Fair treatment is something we are very concerned about," Munn said in a phone interview.

The Federal Reserve received roughly 56,000 letters and e-mails commenting on a proposal to impose stricter rules on the credit-card industry. One of those came from the Colorado Department of Regulatory Agencies.

The Fed aims to protect consumers from unexpected increases in interest rates on outstanding balances and to introduce a number of other reforms.

The proposal would require companies to give consumers a "reasonable amount of time" to make payments and would ban two-cycle billing, in which fees are based on an average balance over a two-month period.

Munn said he welcomed the effort but called on the Fed to take an even tougher stance.

"We want the Fed to focus on consumer protection first because in the proposals there are too many opportunities for institutions to make a choice that is not necessarily consumer-friendly," said Munn, who was appointed by Gov. Bill Ritter. "We'd like the regulators to take a stand."

DORA said the language should be changed to make it easier for consumers to understand and urged the Fed to give credit-card users more of a choice in how payments are applied to balances with different interest rates.

Hundreds of Coloradans have weighed in, calling the companies' tactics abusive and deceptive. Many have complained about rates being raised arbitrarily. But some Coloradans said more regulation is not needed.

The industry has argued that it must be able to charge interest rates that reflect the risks.

"The proposal would lead issuers to raise rates and reduce available credit for all consumers rather than the small subset who present the greatest risk of default," industry representatives said in their own letter.

Munn said "consumers are to blame for some of the problem," but he worries that too often they are being put in an unfair position.

His agency is limited because national banks and card companies are regulated at the federal level, Munn said, but it is examining whether Colorado laws have been violated. He sees similarities between the mortgage crisis and the credit-card mess.

"It's something we're looking into to see if there is anything we can do to address the concerns of Colorado consumers," he said.

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