The Federal Reserve placed a soft cap on credit card late fees last week, the latest salvo in an ongoing battle between Congress and corporations that squeeze consumers with punishing surcharges and fees.  It's a small victory for consumers, but on many other fronts in this war the news isn't nearly so good.  When you consider the way new rules are impacting checking accounts and credit card interest rates, and Congress' incredible unwillingness to take a stand on 401(k) retirement account fees,  it seems consumers are getting nowhere fast.

The rule imposing a $25 limit on credit card late fees isn't bad, although it is ironically dogged by fine print. When Congress passed the Credit Card Accountability and Responsibility (CARD) Act last year, it directed the Federal Reserve to take a crack at making late fees fairer.  The Fed issued its new rule last week.

Credit card issuers had been charging $30 to $40 per month when consumers were even a day late paying their bills. Starting in August, the top charge in most cases will be $25, saving consumers from $5 to $15. Not bad, but hardly the signal of a new age in consumer protection. And even that small victory comes with asterisks. Consumers who are late more than once can face a higher late charge. And banks can appeal to the Fed to raise the fee, as long as they justify the costs.

The Fed rule does offer one piece of unqualified good news for consumers.  Inactivity fees will now be banned. This is important, because the appearance of inactivity fees in recent months led to major confusion for consumers. For years, experts have advised cardholders never to close a credit card account because of negative effects on their credit scores.  The new fees suggested that consumers might be better off closing the cards and taking the score hit.  Now, the old advice is once again valid. Make note, however: Banks can still add an annual fee to your cards, in which case, card holders may be better off closing the accounts to save the money.

The good news ends there, however. Since the passage of the CARD Act last year, half of U.S. cardholders saw their interest rate rise or their credit limit fall, millions through no fault of their credit behavior. Consumer groups had asked the Fed to force banks to roll back those changes. On this issue, the Fed punted, saying only that it would encourage banks to "re-evaluate" the changes.

Don't hold your breath.

The American Bankers Association had a generally positive reaction to the news.

Courtesy, Miller's office

Image of the sarcastic pie sent by Rep. George Miller

“This brings to a close the most sweeping overhaul of the industry since the invention of credit cards. Taken together, the new rules will provide consumers with numerous tools for better management of their credit costs,” said Kenneth J. Clayton, a senior vice president with the trade group.  And the Federal Reserve Governor Elizabeth Duke said in a release that the new rules require that “late payment and other penalty fees be assessed in a way that is fairer and generally less costly for consumers."

But consumers groups had a much more mixed reaction.

"This is tepid," said Kathleen Day, spokeswoman for the Center for Responsible Lending.  "It's marginally better for consumers, but why not make it great for consumers? ... Once again, the Fed just cannot stand to take a stand. (The Fed) always likes to split the difference. They can't ruffle a few feathers. They are trying to be popular with everybody, rather than do their job as a regulator. How is that working for them?"

That reluctance will almost certainly be tested during the next 12 months, when consumers slowly begin to lose free access to checking accounts. Big banks continue to rattle their sabers about this issue, which threatens to cause a gigantic shift in the American banking landscape. With billions in overdraft fee revenue disappearing when those new rules kick in on July 1, banks have begun testing various fee-based checking accounts.  Soon, simply parking $1,000 in an account or employing direct deposit for your payment will no longer earn a consumer free checking at many banks.

It's been a long time since consumers paid for checking accounts – fee-based accounts went out of favor during the early 1990s --  and the banking world has changed dramatically since.  Today, it's nearly impossible to actively participate in the economy without checking accounts, debit cards, online bill payment and all the other functions that stem from checking accounts. But some consumers who are faced with a $10 monthly fee might join the ranks of the unbanked, using money orders and cash to move around the economy.  Annual fees could also hasten the movement to smaller banks or credit unions, which already has picked up steam. Last year, more than 1 million consumers switched to credit unions, according to the Credit Union National Association. And a study by Bankrate.com found that 39 of the top 50 credit unions offer free checking.

Banks, naturally, will give their largest customers a break.  Use multiple services at a bank and you might enjoy a fee waiver. Rather ominously, the Wall Street Journal reported recently that a Bank of America executive told analysts in April: "Customers will have a choice,... (of) bringing more relationships to us or paying a maintenance fee."

It is undeniable that banks are losing a huge chunk of money as easy overdraft fees disappear. And it's not necessarily bad that banks will be forced to charge transparent, up-front fees rather than back-end, gotcha fees to make their money. It's much more natural for consumers to compare monthly fees than overdraft fees, so the change should be positive for competition.

Switching checking accounts is non-trivial, however, and many consumers will likely just pay up. And of course, the devil is in the disclosures. How will banks communicate the new charges and the new hoops consumers must jump through to avoid them?  At the moment, it will be the Fed's job to make sure the transition is orderly and fair.

Congress could get involved, but if history serves as any guide, federal legislation and Washington's slow-moving ways don't work well for regulating granular issues like monthly fees. Credit card late fees are one good example, but the issues surrounding 401(k) fees take the cake.

It's essentially impossible for a U.S. worker enrolled in a 401(k) plan to determine how much he or she paid in fees on their 401(k) investments during a given year. But the cost can be draining 20 percent or more of a worker's retirement kitty.

The charges are disclosed in oblique ways, such as the common "expense ratio," which is expressed only as a percent to consumers.  Back in 2006, Congress' General Accounting Office found that the vast majority of workers don't understand what they are paying in retirement fees.

There are numerous measures of the cost of unexplained fees, but here's one used in that GAO report: a 45-year old worker who puts aside money in a 401(k) and overpays by just 1 percent in fees will see his available retirement funds shrink 17 percent by age 65. Here's a simpler way to look at it: if a money management company takes 1 percent of your money for 20 years, you'll have almost 20 percent less than you should 20 years later. Obviously, the longer you pay into 401(k) plans, the deeper the cuts are.  A 25-year-old could see more than one-third of his or her retirement money sucked out by Wall Street.

For years, Rep. George Miller, D-Calif., has sponsored legislation that would force investment firms to make those fees clear for consumers. Note, it would not limit the fees; it would merely make them more obvious. And every year, dutifully, Congress finds a way to ignore Miller's proposal.

This year, it looked like the legislation had a real shot. It was attached to the American Jobs and Closing Tax Loopholes Act that was passed by the House of Representatives earlier this year. But the 401 (k) portion was yanked two weeks ago by members of the Senate Finance Committee, which is considering the companion Senate bill.

"(Democratic Chairman Max) Baucus threw it out like a paper airplane," said John Wasik, author of several books on investing, including "The Kitchen Table Investor." "He didn't say why, but I think it was a bargaining chip."  

Exasperated, Miller sent a pie to each committee member last week with a one-third slice removed.

"At a time when the middle class has already lost too much of their retirement savings because of the financial scandals, they shouldn't also be losing out because of unconscionable hidden fees," Miller wrote in a letter that accompanied the pies.  "I urge you to stop Wall Street from hiding 401(k) fees by restoring the House disclosure provisions. The 50 million Americans with a 401(k)-style plan deserve a fighting chance to keep more of their retirement pie."

Clearly, the Senate doesn't agree.

Wasik said the Department of Labor, which regulates retirement accounts, is planning to come out with its own set of 401(k) fee disclosure rules within the next few months.  He's optimistic that those rules will deal with many of his concerns, but until they are published and take effect, U.S. savers will remain largely in the dark.

Which brings us back to the point at hand: Credit card fees, checking account fees, retirement fees and most other hidden charges are simply too elusive for Congressional legislation.  You wouldn't expect Congress to legislate the details of an off-shore oil drill's blow-out preventer -- only a regulator with specialized skills and the ability to act fast can provide the needed oversight.  And only an agency with the ability to set and adjust rules on the fly can prevent the gushing of Americans' money out of the checking accounts and retirement accounts to hidden fees.

That the idea behind the Consumer Financial Protection Bureau, which is part of the financial reform legislation that's now in the stretch run in Washington.  Final details about the agency's reach and influence are still in flux, but as currently constituted, it would have the ability to review the credit card and checking account rules issued by the Fed, according to Day, from the Center for Responsible Lending.  It could, for example, lower that $25 maximum credit card late fee.

"It's very inefficient to get all this stuff through Congress, and then industry just finds its way around it anyway," Day said.  "That's a bad way to stamp out bad products.  We need a new consumer protection agency."

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Shopping online became a little safer this weekend when Visa banned a long-standing practice that Sen. Jay Rockefeller had blasted as "deceptive," saying it triggered $1.4 billion in unauthorized charges on 30 million Americans' credit card bills.

The tale provides a good reminder of the importance of scouring your credit card bills every month.

Millions of consumers ended up paying monthly charges for useless travel clubs and similar services after shopping at popular Web sites like 1-800-Flowers.com, Buy.com, Classmates.com and around 450 other sites, staffers for Rockefeller, D-W. Va., concluded in a report issued last year.

Consumers who shopped at the sites were enticed to click on an advertisement that offered free shipping or a discount.  In many cases, merely clicking on the link to find more information led to enrollment in a monthly service – even though there was not so much as a sign-up page or a place to enter a credit card number. Many consumers were surprised to find that their credit card numbers had been furnished to the third-party site without their permission -- a tactic called "data pass."

A sample ad from the Rockefeller report

A new Visa ban against data passing took effect on Saturday.  Visa will now require that Web merchants prompt consumers to re-enter all 16 digits of their credit card number before allowing any third-party charges.

"Consumers who shop online using their Visa cards should be confident that they will only be charged for the products and services they legitimately intend to purchase -- not those that are foisted on them through deceptive data pass schemes," Martin Elliott, a Visa spokesman, said in a statement.

Rockefeller said he was glad Visa banned the practice, but said he would still push for legislation that would make data passing illegal.

"Tricking consumers into buying goods and services they do not want is completely unacceptable," he said. "It's not ethical, it's not right and it is not the way business should be done in America."

Rockefeller's staff found that 88 electronic commerce firms had earned more than $1 million each in commissions by passing consumers' credit card information to three Connecticut-based companies -- Affinion, Vertrue and Webloyalty.

In an e-mail, Webloyalty spokesman Adam Weiner said that the company offers numerous discounts that help consumers. He also said the firm has recently changed its sign-up procedure.

"Since January, the Webloyalty enrollment process occurs only if the consumer enters their entire 16 digit credit or debit card number," he said.  "Accordingly, no additional changes by Webloyalty were necessary in order to conform to Visa's recently announced policy concerning data pass."

A spokeswoman for Vertrue pointed to a statement the company issued last year when the Rockefeller investigation began, indicating the company had begun requiring new customers to enter the last four digits of their credit card numbers before joining their clubs.

"This new layer of enhanced consumer protection reinforces the company's existing, longstanding pro-consumer Internet marketing policies," the statement said.  More recently, the firm has required new customers to enter all 16 digits of their credit cards.

Affinion did not respond to requests for comment.

Brand-name companies like Priceline.com, Hotwire.com and 1-800-Flowers exploited the trust of consumers to trick them into signing up for the unwanted services.

Even as the U.S. Senate Committee on Commerce, Science and Transportation was holding its hearing on the practice, 1-800-Flowers tried a slight variation on the theme: It sent checks to consumers for small amounts, such as $9.30, in official-looking mailers. The checks (one of which was sent to this reporter) could easily be mistaken for refunds, and they were sent out at the same time that 1-800-Flowers customers were receiving e-mails about $10 coupons that were available as the result of a class-action lawsuit. But consumers who endorsed the checks and cashed them were enrolled in a fee-based travel discount service, using the same data-pass technique.

Part of the check sent by 1-800-Flowers

According to the check, the travel program -- called Elite Excursions -- was offered by Trilegiant Corp., part of Affinion. Connecticut-based Trilegiant paid $25 million in 2008 to settle a class-action lawsuit accusing it of billing consumers for products and subscriptions they'd never requested.

Joseph D. Pititto, spokesman for 1-800-Flowers, described the checks as an "old program, mailed out by a third party" and said the program was discontinued in December.

The Rockefeller report found that many consumers failed to complain to the original Web site they'd used because they often had no idea how they'd signed up for the travel club service. And the loyalty club companies went to great pains to keep consumers from making the connection.

An e-mail written by an Affinion executive to a 1-800-Flowers executive in November 2008, and obtained by Rockefeller's staff, revealed just how far the loyalty club firm would go to insulate clients from complaints.

"(Revealing partner information) is a STRICT no-no in our centers. We tell agents not to do it and don't give them our client's phone numbers and so on," the e-mail read. "If we hear instances (of) it in our monitoring/test calls, they will fail that call and get dinged on their incentive payments."

Other major credit card processors are also taking action against the data pass tactic. Lisa Anselmo, a spokeswoman for American Express, said the firm already monitors merchants for "excessive disputes" and potentially deceptive or unfair practices. The firm's merchant regulations will soon be amended to require that merchants to "directly" obtain card information from card members.

"Card members will have to re-enter their card information ...  in order to process the transaction," she said.

Chris Montero of MasterCard said that his firm's rules already prohibit data pass tactics.  Firms that engaged in the practice were violating those rules, he said.

"There is awareness now, and enforcement of (the rules)," he said.

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Hate hidden fees and other "gotchas" from credit cards and banks? You have until Aug. 4 to sound off about it.

In May, the Federal Reserve proposed a sweeping set of rule changes that would ban a wide set of consumer-unfriendly bank practices. The rules would prevent credit card issuers from charging retroactive rate increases on outstanding balances, for example, and ensure that bills are mailed at least 21 days before the balance is due. It would also make it harder for banks to change overdraft fees in some cases, and clarify a wide set of bank practices that sometimes seem like booby-traps designed to cost consumers.

The proposed rules are now open to public comment, but only until Aug. 4. Consumers who would like to make their opinions known about the new regulations can simply fill out a form on the Fed's Web site and leave comments there. Here's a link. Scroll about two-thirds of the way down the page and look for the words "submit comment."

Consumers should know that all comments will be made available to the public on that same Web site. In fact, already 31,000 comments have been made, though the Fed says 19,000 of those came via form letters. Still, according to CreditCards.com, the Fed's credit card proposals have drawn the second-most public comments ever, eclipsed only by a proposal involving real estate rules dating to 2000.

Sometimes, it's not good to know how the sausage is made. But credit card and bank rules are too important to leave to the sausage makers, and fortunately, all comments made so far are available for public inspection. They are worth at least a casual browse.

You can see a list of all 12,000 or so online comments here, but don't click on this link unless you have patience and a high-bandwidth connection.

A much shorter sampling of comments can be seen here.

Mostly positive
So far, the comments are overwhelmingly positive about the new rules, and encourage banking regulators to adopt them as soon as possible. But many comments are brief and some are full of simple name-calling.

"I recently had a WaMu credit card raise my interest rate by 60% and my minimum payment by 30% without explanation," is the entire comment left by a typical frustrated writer.

If you'd like to leave a more thoughtful comment about credit card and bank policies, you can read more about the rules in msnbc.com's prior coverage here.

You can also try to dig through the full text of the draft proposals, though they are a beefy read.

Digging deep
You will find satisfyingly detailed nuggets however, such as a rule that would "prohibit creditors from setting a cut-off time for mailed payments that is earlier than 5 p.m. at the location specified by the creditor for receipt of such payments." Many card companies now say the payment deadline is 1 p.m. on the due date, putting consumers at the mercy of the post office and the mailroom guy.

The rules also call for an end to some unhelpful bank euphemisms, such as the "grace period." Banks instead will be forced to use plain language like "how to avoid interest."

Detailed commentaries are still expected from industry groups and individual banks; these are likely to be relentlessly critical of the proposals. Immediately after the new rules were announced, the American Bankers Association issued a press release saying the regulations are "effectively price controls, which have never worked in the past, and we do not believe they will work here." Limiting the interest rates and fees that banks can charge troubled customers will end up forcing the institutions to charge higher rates to good customers, the association argues. "These rules will result in less competition, higher consumer prices, fewer consumer choices and reduced consumer access to credit cards," the bankers claimed.

While most banks have so far pulled their punches, hidden within the public comments are hints about the arguments banks will make. Officials from several financial institutions have met with regulators separately to express their concerns about any new consumer protections; notes from these meetings have been posted as comments. In one such note, American Express officials plead with regulators to postpone implementation of any changes for 18 months after adoption to allow "adequate time for system changes, staff training, testing, and integration." Other banks asked for similar 18-month timetables. During its meeting, Amex took issue with other proposals, such as a requirement that banks provide written notice before raising a consumer's interest rate.

"We ... continue to believe no additional prior notice should be required where the penalty (interest rate) has already been disclosed to consumers and is part of their account terms," American Express officials said, according to the note.

Little guys get in on the debate
Smaller lending institutions are also getting in on the discussion. In a letter send by Jeffrey Hubbard, vice president of risk management at Merrimack County Savings Bank in New Hampshire, the lender says technology limitations would prevent the bank from allowing consumers to opt out of overdraft protection when using debit cards to make withdrawals or buy things, but leave it in place for written checks.

"We wish to point out that a true opt-out of the payment of overdrafts related to ATM and (point of sale) debit card transactions is not feasible," he writes

To find more industry comments, click on the "all comments link" and look for links to comments that were not left by an individual.

Consumers, while mostly positive, also offer some criticism of the proposed Fed rules. Chief among them: They want banks to stop imposing overdraft fees when a bank has received a deposit that would cover the payment but has not yet been credited their account.

"I support your plan to ban overdraft fees on debit holds. Please go one step further and ban overdraft fees when the funds are in my account but haven't cleared yet," wrote Jim Flammio of Tacoma, Wash.

Other comments sound as if they come from exasperation.

"Give consumers a break," wrote Edward Dunne of Tampa, Fla., in his brief note

Consumers have two more weeks to give regulators their views.