Legislation to Watch: The Credit Cardholders’ “Bill of Rights”

Are you sick and tired of unfair credit card practices? Do you think the current rules let lenders trap us into paying far more than we should, with interest rates and fees that are too high and arbitrary? Have I got a bill for you: H.R. 5244, the Credit Cardholders' Bill of Rights Act, which was introduced in the House by Representatives Carolyn Maloney and Barney Frank.

Here are the top five changes the “Credit Cardholders' Bill of Rights Act” would bring:

1. Credit card companies would no longer be able to change the terms “at any time, for any reason,” which all too often seems to be “no reason,” if Bank of America’s recent rate hikes are any indication. Instead, lenders would have to be up-front about the specific reasons why they would change the terms.

2. Lenders could not practice “double-cycle billing,” that is, they could no longer calculate interest on your average daily balance over this billing cycle and the last one. Even if you pay off a balance during the grace period, if your card is from a lender who practices double-cycle billing, you’re going to pay interest. Many issuers have stopped using this method. If yours hasn’t, switch!

3. Card companies would not be able to assign all our payments to the balance at the lowest interest rate, as they do now. Instead, they would be required to divvy-up our payments proportionately, even if balance transfers are at 0% and purchases are at 13.99%.

4. Retroactive rate hikes would be prohibited. Let’s say a card issuer extends credit to you at 7.99%, and you have an outstanding balance of $2,000. Even if your credit score changes, the lender would not be allowed to raise the rate on your $2,000 balance because of a change in your credit score. 

5. The rules defining an on-time payment would be clarified. No matter what the issuer, payments received by 5 PM Eastern time would be considered on-time, and lenders would have to mail out bills at least 25 days before payment is required.

Who Supports the Bill?
The legislation has already received support from many of the best consumer advocates we have in Washington, including Consumers Union, Consumer Federation of America, Center for Responsible Lending, Consumer Action, U.S. Public Interest Research Group, and the Service Employees International Union.

They want the legislation to be even more consumer friendly, and are calling for the prohibition of universal default rate hikes and over-limit fees when the transaction has already been approved by the issuer. They want Congress to require that the size of penalties charged by issuers be directly related to actual costs incurred. Finally, they are calling for more protection against low-credit, high-fee cards―known as sub-prime cards. 

Creditors Won’t Make It Easy
Card issuers are not thrilled about this legislation, to say the least! They are lobbying Congress hard, in ways we might not have expected. For example, earlier this month, five real, live cardholders were invited to testify about this bill. But, “they couldn't talk unless they would sign a waiver that would permit the credit card companies to make public anything they wanted to tell about their financial records, their credit histories, their purchases, and so on," as Harvard Professor Elizabeth Warren explains it. "The Republicans and Democrats had worked out a deal ‘to be fair to the credit card lenders.’ These people couldn't say anything unless they were willing to let the credit card companies strip them naked in public.”

You can read what three of these cardholders would have testified about on Consumer Action’s site – one had concerns about fees, and the other two had issues with unfair rate hikes – nothing we have not discussed on Creditbloggers time and time again. Yet the lenders were so concerned about what they would say, they made it virtually impossible for them to speak.

Stay tuned! We’ll be sure to keep you posted about this important legislation. This should be quite a fight.

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

Comments

[Jim]

While this sounds interesting, I don't get my hopes up when it comes to the government actually solving a problem. Politicians need money and votes in order to hold their position, and while they are supposed to hold the view of the people in higher regard, it's the one paying for the meal ticket that gets the first say.

I've also discovered that I don't need to rely on either of them to solve my problem. Credit allows you to go into debt if you don't have the money and government taxes the money you do have. Spending is a bigger problem that needs to be addressed in this country. Our national debt levels and the levels of debt people carry needs to be looked at.

[Keith Adams]

Thanks for posting this, especially the part about the retroactive rate increases. I'm going to link to this article in my blog http://creditcardsforcollegekids.blogspot.com