We sent a letter to the Federal Reserve Board today telling them to stop credit card companies from unfairly hiking interest rates and engaging in other unfair practices designed to get around new consumer protections set to go into effect in early 2010. In short, do your job and tell the jerks to stop.

The Fed is currently considering a set of proposed regulations to implement the Credit CARD Act passed by Congress earlier this year. Most of the new rules are due to go into effect on February 22. In the meantime, however, credit card companies are raising interest rates on many customers and implementing new changes to contracts in order to circumvent the protections of the new law.

We told the Fed to stop these abusive practices along with adopting other protections, including:

Stop credit card issuers from coercing customers to accept interest rate hikes that will be illegal under the new regulations:

Chase bank has drastically raised minimum payments twice in the past 12 months on many customers with credit cards that had a promotional fixed interest rate for the life of the loan. Many card holders with large balances have been faced with the difficult choice of accepting a 250% hike in their minimum payment or a higher interest rate that will soon be prohibited by law. In most cases, the Credit CARD Act prohibits card issuers from raising interest rates on existing balance unless the customer has been more than 60 days late.

Prevent card issuers from using “interest-back programs” to raise rates that will be illegal under the new regulations:

Citibank has been changing customer contracts to raise rates to as high as 29.9% but offering to credit back 10% of the interest if customers pay on time. This “interest-back” promotion disguises an interest rate increase that would be prohibited under the Credit CARD Act unless the customer was seriously delinquent.

Require card issuers to provide written notice about a consumer’s right to opt-in for overlimit coverage:

The Credit CARD Act says that card issuers can provide oral, written, or electronic notice to customers about their right to opt-in for overlimit charges. If customers opt in, then the card issuer will allow transactions that exceed the credit limit, but the customer will be hit with a high overlimit fee. Customers who do not opt-in can’t go over their limit and are not subject to these high fees. The Consumerist web site reported earlier this month that Capital One has been calling customers to get their consent to opt-in for overlimit programs. The Consumerist story and the comments it generated from consumers made clear that these phone calls from Capital One were sometimes misleading and left many customers confused about their rights.

Make sure that variable rates are really variable:

In recent months, many credit card issuers have been switching customers to variable interest rates tied to an index like the U.S. Prime Rate. But some banks switching to variable rates are setting a minimum rate that will be charged regardless of how low the index goes, which deprives consumers of the full benefit of a variable rate when the index falls. Consumers Union urged the Fed to prohibit variable rates with a fixed minimum APR.

Protect consumers from credit card contract changes that hurt credit scores: Credit card issuers have been closing accounts and reducing credit limits for many customers. Both practices can have a negative impact on a customer’s credit score. Consumers Union called on the Fed to require card issuers to provide customers with good payment records with a 45 day notice of such changes and to require creditors to freeze accounts rather than close them when customers decide to reject a rate increase or change in terms.

Make it easier for consumers to earn their way out of a penalty interest rate:

Under the Credit CARD Act, consumers who pay their bill more than 60 days late can be hit with a penalty interest rate on existing balances. But the Act enables consumers to earn their way out of the penalty interest rate if they pay their bills on time for the first six payments after the penalty interest rate is assessed. Consumers Union urged the Fed to expand this right by allowing consumers to earn their way out of a penalty rate after any six consecutive on time payments, not just the first six payments.

Isn't ironic that these companies whined, complained and spent tons of money lobbying Congress to have more time to implement consumer protections only to use that time to rip us off more. Ok, maybe ironic is not quite the right word. What we need is a Consumer Financial Protection Agency to keep these companies in check.