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Bill Would Outlaw Some Credit Card Practices That Critics Say Confuse Consumers

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WASHINGTON (AP) _ Legislation proposed Tuesday would outlaw some credit-card billing and interest-rate practices that critics say confuse consumers and can push them deeper into debt.

The bill authored by Sens. Carl Levin, D-Mich., chairman of the Homeland Security and Governmental Affairs Committee's investigative panel, and Claire McCaskill, D-Mo., would ban interest from being charged on any portion of a credit card debt that the consumer paid on time during a grace period.

It also would limit so-called penalty increases in interest rates, which are imposed when a payment is made after the due date, to a maximum 7 percentage points above the current rate.

The legislation was heralded by consumer groups. Many lawmakers, however, have expressed reluctance to impose mandates on how banks do business.

Sen. Christopher Dodd, D-Conn., who heads the Senate Banking Committee, which has jurisdiction on the issue, said he will examine the proposal ``in a careful and thoughtful fashion.''

Heightened scrutiny of credit card practices has come from the new Democratic-controlled Congress, which has put a number of consumer issues on its legislative agenda. With Americans weighed down by some $850 billion in consumer debt, the practices of the robustly profitable credit card industry are a compelling subject for scrutiny.

Amid the congressional focus, several major banks recently began to eliminate or temper some of the practices.

An investigation by Levin's subcommittee found abusive and confusing practices, and repeated penalties imposed by credit card issuers that are said to amplify the financial woes of many Americans while bringing in tens of millions of dollars for the companies.

The bill also would:

_Require increased interest rates to apply only to future debt on a credit card account, not to debt incurred prior to the increase.

_Prohibit charging of interest on credit card account fees, such as late payment fees and fees for going over the credit limit.

_Prohibit charging of repeated over-limit fees for a single instance of exceeding a credit limit, and allow the fees to be charged only when the consumer's action, rather than a penalty, causes the limit to be exceeded.

_Ban so-called ``pay-to-pay'' fees, often charged when consumers make payments on their accounts by telephone. Such fees would be prohibited for any form of payment, including mail or electronic transfer.

_Require payments to be applied first to the portion of the account balance with the highest interest rate.
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