Complain about a product or service

House Passes Credit Cardholder's Bill Of Rights

Decisive majority endorses consumer protections

By Martin H. Bosworth
ConsumerAffairs.com

September 23, 2008

• Credit Tips And Tricks • Get Control of What You Owe • No Easy Way Out Of Credit Card Debt • Penalty Fees, Interest Rate Hikes, and Misleading Contracts Await Credit Card Shoppers • "Convenience Checks" Carry a Heavy Price Tag • New Forms of Credit Scoring • Understanding Credit • Credit Bureaus: Who You're Dealing With • Reading Your Credit Report • Credit Scoring: The Fickleness of FICO • Credit Knowledge: A Long, Hard, Struggle --- News • Schumer Moves to Clean Up Credit Reporting Ads • Report: Deceptive Credit Card Practices Remain Widespread • Dodd Bill Would Freeze Credit Card Rates • Annual Credit Card Fee Makes a Comeback • Credit Card Holders Angrily Abandon Their Cards • Fed Proposes New Credit Card Rules • Lawmakers Propose Faster Adoption Of New Credit Card Rules • Acid Test: Prepaid Debit Card vs. Big Bank • J.D. Power: Customer Satisfaction With Credit Cards Falls • How To Survive The New Credit Card Rules • New Credit Card Law Not A Cure-All • Consumer Credit Continues To Shrink • Consumers Using Credit Cards To Stay Afloat, Survey Finds • Credit Cards Giving Consumers Heartburn • Obama Signs Credit Card Bill • Olive Garden Settles Credit Card Data Exposure Suit • Video — Credit Card Law May Produce Unintended Consequences --- • More about credit cards

The House of Representatives today passed by a large margin legislation designed to protect consumers from abusive lending practices of credit card companies.

HR 5244, "The Credit Cardholder's Bill of Rights Act," passed the House 312-112, with 228 Democrats and 84 Republicans voting to support it. 111 Republicans and one Democrat voted against the bill, which now goes to the Senate.

Chances for passage of the legislation in the Senate this term are mixed, as the legislative calendar is shortened due to the 2008 Presidential election campaign, and the proposed $700 billion bailout of the financial system by Treasury Secretary Henry Paulson is taking center stage.

Supporters of the bill used the proposed bailout as a backdrop to justify passing stronger laws to protect bank customers from the more underhanded tactics of the financial industry. The legislation would prohibit:

• Bait-and-switch interest rate and fee hikes for any or no reason at all during the life of the card;

• Assessing hidden and unfair interest rate charges by charging interest on balances already paid off;

• Unjustifiably maximizing interest charges by requiring consumers to pay off balances with lower interest rates before those with higher rates;

• Charging late fees when consumers mail their payments seven days in advance of the due date;

• Applying certain unfair interest rate hikes retroactively to balances incurred under the old rate.

"We are providing a $700 billion bailout for banks--how can we not provide even the most basic protections for Main Street?," said bill author and sponsor Rep. Carolyn Maloney (D-NY).

Consumer advocates hailed the passage of the bill as a big step forward for protecting American livelihoods. "[This] bill would curb some of the most arbitrary, abusive, and unfair credit card lending practices that trap consumers in a vicious cycle of debt," said Travis Plunkett of the Consumer Federation of America.

"We urge the Senate to include credit card reform as part of legislation it passes to rescue banking firms," Plunkett said. "Cash-strapped consumers shouldn't continue to be gouged by excessive credit card rates and fees by many of the same financial institutions that will benefit from the bailout."

Opponents of the bill claimed that its passage would cause banks to reduce available credit lines and raise interest rates at a time when the worsening economy has Americans increasingly reliant on credit cards to pay for everyday expenses.

"If creditors cannot properly price credit for riskier consumers, some creditors may make the entirely rational decision of withholding credit from the higher-risk consumers altogether," according to one Republican insider. "The people whom this bill purports to protect--those with imperfect credit histories and young people or new market entrants without much of a credit history--will be those who find it most difficult to get credit under this legislation."

But supporters pointed out that banks are raising interest rates and fees on even their best cardholders, simply to earn more profits and maintain a cushion of revenue as the economy continues to falter.

"Consumers in perfectly good standing with their credit card company are understandably outraged when that company hikes their interest rate based on information unrelated to the card," said Pamela Banks of Consumers Union. "But it's even more outrageous to apply this type of rate increase to credit card debt already borrowed at the lower rate."

Tamara Drout of the nonpartisan policy research center Demos pointed out that the costs of America's credit card debt are borne excessively by African-American and Latino households. "Over 90 percent of African-American families earning between $10,000 and $24,999 had credit card debt," Drout said.

"Meanwhile, only 7 percent of white cardholders are charged interest rates over 20 percent, but 15 percent of African-American cardholders and 13 percent of Latino cardholders pay such rates," Drout said.

"Credit card issuers have not learned the lessons of the mortgage crisis," said Lauren Saunders of the National Consumer Law Center. "It is both unfair to consumers and irresponsible banking to lure people in with deceptively low rates and then, once they have incurred a large balance, explode their interest rates."

Report Your Experience
If you've had a bad experience -- or a good one -- with a consumer product or service, we'd like to hear about it. All complaints are reviewed by class action attorneys and are considered for publication on our site. Knowledge is power! Help spread the word. File your consumer report now.

Share		Follow us on Twitter.