Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Sunday, September 28, 2008

Credit Cardholder's Bill of Rights

The Credit Cardholders' Bill of Rights Act of 2008 (H. R. 5244) passed the U. S. House of Representatives 312-112 on Sept. 23. It has now gone to the Senate. Given the $700 billion bailout, Democrats should shame Republicans into accepting this bill's basic consumer protections, which should have been enacted long ago:

1. Prohibits retroactive rate increases. Credit card companies may not increase the interest rate on existing balances, except when fixed-term promotional rates expire, or as a penalty for missing payments. In other words, the terms under which the prior credit was extended may not be arbitrarily changed.

2. Prohibits surprise rate increases. Credit card companies must provide at least 45 days notice in writing of any rate increase on future balances. Once notified, a consumer always has the option to cancel the card and repay the balance without incurring any fees.

3. Prohibits "universal default" rules. Credit card companies may not increase balances based on external factors such as the consumer's credit bureau scores.

4. Prohibits double-cycle billing. Finance charges may only be based on the balance of the current period, not the average of the previous two periods. This accounting trick has been used to bilk consumers of billions of dollars.

5. Prohibits excessive over-the-limit fees. Only permits credit card companies to charge over-the-limit fees once per billing cycle. Gives consumers the right to instruct a credit card company to refuse all over-the-limit transactions on their behalf, thereby avoiding all such fees.

6. Prohibits disproportional application of payments. When different portions of a credit card balance accrue interest at different rates, a creditor must apply payment proportionally to all. The credit card company may offer to repay the higher-interest portion first, but may never shunt disproportional payment to the lower-interest portion (except for special promotional offers).

7. Prohibits hidden due dates. Requires credit card companies to provide a clear "safe" payment due date on each statement, which if met will incur no penalties. Requires that any on-line or telephone payment made directly to the credit card company before 5:00 pm on that date be considered on time.

These are good, solid protections and I hope the Senate will act quickly! Too many consumers are unable to manage their debt because the terms are misleading or can be changed without warning. This has got to stop.


Anonymous said...

Based on recent reports on the bankruptcy blogs, it's not likely to pass this time, but hey, I'm an eternal optimist.

If you haven't already, I encourage everyone who posts or comments to watch a documentary called "Maxed Out."* It gives a very good explanation about how the credit card companies decided to offer an insane amount of credit, write off some defaults, and profit off of anyone who carries a balance or (worse) gets in over their head. The credit card companies can predict with almost-mathematical certainty whether a person can pay back the amount he or she can charge on their SuperMaxPlatinumGoldExecutive card. The customer they want is not the person who pays off the balance every month (they are called "deadbeats" in the trade), but they want someone who carries a high balance and pays the minimum amount after the due date.

One argument I hear a lot from conservative types is a sort of "take personal responsibility, stop blowing a hundred bucks at Nordstrom every weekend and you won't have any credit-card debt," but when you look at why people get into a debt free-fall, there is often a personal crisis like a job loss, medical bills, or divorce. It's time for a little compassion and a little regulation.

-Seventh Sister

*There is also a really good Frontline on this problem, too, which includes an interview with this very secretive fellow who pretty much created the universal default system.

The Law Talking Guy said...

Republicans will do everything to kill it, because it hurts their owners. Fortunately, it's got legs as a campaign issue. This is exactly the kind of issue that reminds American voters that the Republican party exists primarily to support the interests of powerful elites.

Raised By Republicans said...

This probably has more "legs" (or at least as long "legs") as housing stuff. The housing thing really hasn't hit a big percentage of voters. But I don't anyone who doesn't hate their credit card company.

Pombat said...

RbR: hell, I hate my credit card company, and I don't even have a credit card in Australia! :-)

USwest said...

Id on't hate my card company. But then, I'm a deadbeat.