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.