Harry Moroz
House Passes Legislation to Protect Credit Cardholders
While congressional leaders, administration officials, and presidential candidates debate how to pull the economy out of crisis, the House on Tuesday passed an important measure to keep American consumers out of danger in the first place. The Credit Cardholders’ Bill of Rights, though not as strong as other credit card consumer legislation, bans or limits several of the most devious practices employed by credit card companies, practices that tend to keep consumers mired in debt.
In July, Mark described just how difficult passage of the legislation would be:
Watching Carolyn Maloney and consumer advocates shepherd the Credit Cardholders Bill of Rights Act of 2008 – introduced by Maloney to "level the playing field" between credit card consumers and card companies – will be like watching Indiana Jones trying to make it out of a temple of doom alive. Running at full tilt, holding one of the most important pieces of consumer protection since the Truth in Lending Act became law, supporters of HR 5244 will have to travel a dark and perilous gauntlet riddled with every boulder of death, fiery trap and legislative assassin that the credit card lobby can drop in their path.
For years, the credit card industry has been increasing the amount and frequency of over-the-limit and late fees and imposing finance charges multiple times on the same balance. Cardholders were charged $33 billion in fees in 2007, an increase of 208% since 2002. Further, the industry employs guerrilla marketing tactics that sent 6.06 billion credit card offerings to American households in 2005 alone.
In brief, the final legislation (which differs slightly from the original version described by Mark):
- limits the circumstances under which credit card companies can increase interest rates;
- requires creditors to notify consumers of an increase in their interest rate at least 45 days before the increase takes effect;
- prohibits finance charges on card balances accrued in previous billing cycles;
- regulates how credit card companies apply payments to balances held at different interest rates.
The Credit Cardholders’ Bill of Rights is a first step in protecting consumers from industry practices that can keep them mired in credit card debt despite their best efforts to dig themselves out.
The bill, however, suffers from several deficiencies. Stronger legislation would ban universal default outright, prohibit binding mandatory arbitration clauses in credit card contracts, and end federal preemption of strong state laws designed to protect consumers from harmful credit card practices.
Full analysis of the legislation is available at TheMiddleClass.org.
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Posted at 10:53 AM, Sep 25, 2008 in
Consumers
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