This last month I was reconciling all my credit cards and I actually took a few minutes to read the terms. It was ironic that my activities were just about the same time the Federal Government decided to turn its attention to credit card abuses.

Each day it seems that we hear about the Federal Reserve dropping one interest rate or another by a quarter point or a half point. Yet, it sure seems that our credit card interest rates do anything but go down. Credit card companies make their money in a variety of ways, the most benign being the fee they assess the merchant for the privilege of accepting a credit card. This particular fee is part of the cost of a merchant doing business, and of course gets passed on to the consumer in the merchant’s computation of his selling price. The merchant has to assume that a customer will pay by plastic and has to build the credit card fee into the price.

That isn’t really the profit center for the credit card companies. It is the consumer and especially the consumer that carries a balance on their credit card from month to month. Credit card companies, without any real notice, change interest rates. Rate changes can be built on both the consumer’s history with a particular card, or even in unrelated matters — the most notorious is the universal default clause. Under these clauses if a consumer defaults on one account, it is considered to be a default on other unrelated accounts. The practical impact is that if you get a late payment on one account, for whatever reason, you may see a number of your other accounts suddenly increase your interest rate to astronomically high levels — I have seen credit card rates that would make a loan-shark blush!

The universal default clause isn’t the only practice that can be seen as abusive. Credit card companies charge for late payments, accounts that exceed credit limits (though remember their system pre-approves your charges) and arbitrarily changing rates on existing balances. The Consumer Union estimates that credit card issuers collect $15 billion annually in penalty fees, and overdraft fees run to $17 billion a year.

Finally, the Federal Reserve and the office of Thrift Supervision have proposed rules to curb these abuses. “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.” It should be little surprise that the credit card companies and banks are not too happy.

The Rules are open for public comment for the next 75 days and should be final — amazingly enough, around the time for the elections. The key provisions in the proposed rules are:

1. Require that there be a reasonable time to make payments from when the consumer gets their statement.

2. Eliminate double cycle billing.

3. Prohibit interest rate increases on outstanding balances

4. Require that payments are applied against balances with higher interest rates first within the same account.

5. Bar over limit fees based upon credit card holds and reservations which have not actually debited an account.

6. Prohibit fees on low credit limit accounts which would consume most of the credit limit upon issuance.

7. Full disclosure of how credit interest rates are determined.

8. Allow consumers to opt out of overdraft programs.

The irony of all the abusive practices of the credit card companies is that they actually make defaults more likely and far more difficult to cure. If a consumer is already struggling, the combined effect of the current regime of credit card practices only serves to make the ability to recover financial health almost an impossibility.

Clearly, the best way to avoid being abused by your credit card company is to always pay your balance in full each month — but the practice of double cycle billing can even cause you frustration then. If you don’t pay your balance in full, make sure you pay it on time and pay more than the minimum payment.

Yet, if like many consumers you find that you have run up your credit cards to a point that they are consuming your life and your paycheck, it is time to seek out professional assistance. Credit counseling services are available, but they require caution to be sure you are going to use a reputable firm. The best source of sound advice and solid recommendations is your family attorney.

****The information provided in this column is based upon general principles of law and should not be relied upon in any manner. It is not the intent of this column, its author, publisher or the Fence Post to provide legal advice to any person. You should address specific legal questions to your family lawyer. In Wyoming, the State Bar can refer you to competent lawyers in your community by calling (307) 634-7823. In Colorado, call the Metropolitan Lawyer Referral Service at (303) 831-8000. Readers in Nebraska can receive referrals from the State Bar Association by calling 1-800-742-3005.****