Credit card reform gets another look

— -- As credit card fee increases squeeze more consumers, lawmakers are stepping up efforts to reform criticized practices.

In the latest round of fees, Capital One cof, Citibank c and HSBC are raising interest rates for millions of credit card borrowers. Chase jpm is tacking on a $120-a-year fee and raising the minimum payment from 2% to 5% of the balance for hundreds of thousands of consumers with low interest rates. The actions come as unemployment rises and more consumers struggle to pay their bills.

In a hearing Thursday, some lawmakers said the moves were angering consumers and Congress alike — and giving reason for an immediate crackdown on credit card practices.

"Consumers are trapped in a business model that is designed to induce mistakes and jack up fees," said Sen. Charles Schumer, D-N.Y. "This type of tripwire pricing is predatory and must end."

In December, the Federal Reserve and other regulators released a rule reforming some of the most controversial practices, such as raising rates on existing debt. But that doesn't take effect until mid-2010. Advocates say that's too late for struggling consumers. "We're all going through an economic crisis right now, and we need reforms that will help consumers now," says Bill Hardekopf, CEO of LowCards.com.

Yet imposing restrictions sooner may "send further chills in a market already in deep freeze," says Ken Clayton of the American Bankers Association.

Already, many card issuers have raised interest rates and fees in the past year. The latest: Capital One. Spokeswoman Pam Girardo says it's raising rates on certain credit cards "to reflect the current risk environment." Capital One told some borrowers it was raising the interest rate to 17.9% from 12.9%.

Hardekopf says Capital One is also raising rates on a "significant" number of cards offered to new borrowers; some card rates are rising by nearly 6 percentage points, to 14% from 8%.

HSBC recently notified Best Buy credit card borrowers that it's also raising their rates. Spokeswoman Cindy Savio said the decision was based on "economic, market and other factors."

At Chase, some card borrowers were given the choice between the new fee and higher minimum payment, or a higher interest rate of 7.99%. Previously, some borrowers had rates of 3.99%. Chase said it changes card terms due to market conditions or borrower risk.

Citibank is increasing card rates an average of 3 percentage points on millions of cards because of the economy. Spokesman Sam Wang says the bank repriced only customers whose rates hadn't been raised for two years.