Nov. 23 (Bloomberg) -- The Federal Reserve needs to strengthen rules to prevent banks from circumventing the credit- card law, Senator Carl Levin said.

Consumers have been “hit with an array of unfair practices, some of which seem to have been designed specifically to evade or circumvent” the law signed by President Barack Obama May 22, Levin, chairman of the Senate Permanent Subcommittee on Investigations, said in a letter to the Fed today.

Banks that adopted variable interest rates on charges that can’t fall below a fixed minimum rate of the issuer’s choosing don’t meet the requirements of the credit-card law, said Levin, a Michigan Democrat.

Cards that include interest-rate rebates “create layers of complexity that are confusing and invite a host of abuses,” Levin said. In one case studied by the subcommittee, a bank charges 29.99 percent, and customers can “earn back” 10 percent of the total interest by spending $1,500 each month.

The credit-card law takes full effect in August 2010. The first part, which enables consumers to reject a rate increase and pay off their balances at the current rate, began in August. The Fed proposed rules to end banks’ ability to apply payments to balances with the lowest interest rates first on Sept. 29.

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net.

Last Updated: November 23, 2009 15:48 EST