Editorial: Why wait on credit rules? (USA Today)

It's not hard these days to find evidence of the decline of prudent decision-making and ethics in the banking industry. After all, reckless lending practices designed to generate short-term profits and enormous bonuses helped bring the economy to its knees.

But perhaps nothing shows how far the industry has fallen more than the practices of certain credit card issuers. For years they have pursued a business model based on encouraging consumers to get in over their heads and then squeezing them with usurious interest rates.

Now, with the sagging economy causing default rates to soar, the issuers are trying to limit their losses — which could reach $82 billion under the scenario in federal regulators' "stress tests" — by jacking up rates and fees and slashing credit lines.

Some of these practices are so obviously harmful to consumers and the economy that the Federal Reserve moved last year to ban them. The House of Representatives also voted overwhelmingly last month to impose new limits on credit card companies.

But the Fed rules don't go into effect until July of 2010. The House measure would bar retroactive rate hikes on existing balances 90 days after enactment; other provisions wouldn't kick in for a year. In the meantime, some card issuers are rushing to squeeze every dime out of cardholders while they still can.

This raises the obvious question: If President Obama, the Fed and legislators of both parties believe these changes are necessary, why shouldn't they take effect as soon as possible?

If card issuers can change the terms on their customers in 30 or 45 days, often by sending them a notice with the new terms buried in the fine print, they shouldn't need a year or more to adapt to new regulations.

To be sure, many of the banks are still in a fragile state. They are absorbing losses not only from credit cards but also from mortgages, commercial loans, and trading and investments. But allowing them a year of indulgence to engage in practices that never should have been tolerated in the first place is not the answer to the industry's woes.

This week, the Senate will turn to its version of the legislation, and Obama will hold a town hall meeting on the subject. It's time for Washington to send the credit card issuers their new terms and conditions.