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House Approves Credit Cardholders’ Bill of Rights

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Washington, DC, April 30, 2009 | comments

Today, the House of Representatives overwhelmingly passed legislation that would protect consumers from deceptive credit card practices and equip them with the information and rights they need to responsibly manage their credit. The Credit Cardholders’ Bill of Rights Act passed by a vote of 357 to 70.

The bill, sponsored by Rep. Carolyn Maloney (D-NY), represents an unprecedented effort to level the playing field between card issuers and cardholders. It would ban some of the most abusive industry practices including retroactive interest rate hikes on existing balances, double-cycle billing, and due-date gimmicks. Credit card companies would be required to provide 45 days advance notice of any impending rate hike, giving consumers time to pay off their balances and shop for a better deal.

“When it comes to credit cards, doing the right thing and playing by the rules just doesn’t work because the companies are engaging in ‘unfair’, ‘deceptive’ and ‘anti-competitive’ practices. We are changing that today with the historic Credit Cardholders’ Bill of Rights,” Maloney said. “Today, the House sent a message to the American public that responsible regulation is part of the new era of financial responsibility—and that responsibility works both ways, for companies as well as consumers. By passing this bill, we are helping everyone with a credit card.”

“The average credit card debt among American households has more than doubled over the past decade,” said Rep. Luis Gutierrez, Chairman of the Subcommittee on Financial Institutions and Consumer Credit. “Today, the average family owes roughly $8,000 on their credit cards.  Meanwhile, as Americans struggle to make ends meet, a growing share of the industry's revenues come from deceptive tactics, such as universal default terms spelled out in fine print — the terms and conditions of which can be changed at any time for any reason with 15 days' notice or less. The Credit Cardholders’ Bill of Rights responds by applying common-sense regulations that reward hard work and responsibility rather than high-flying finance schemes.”

Under the measure, consumers would be given new protections against misleading, often incomprehensible, contract terms. Companies would be required to alert consumers 21 days before their bills are due, preventing due-date schemes. Cardholders would be shielded from being unfairly penalized for paying on time and empowered to set lower credit limits. The bill also would restrict fees charged when customers pay by phone and generally ban credit cards to minors under age 18.

The House also passed a number of amendments to the Credit Cardholders’ Bill of Rights that would strengthen consumer protections in the bill.  Some of those amendments include:

  • Student Credit Cards:  Set underwriting standards for students’ credit cards, including limiting credit lines to the greater of 20 percent of a student's annual income or $500, without a co-signer and requiring creditors to obtain a proof of income, income history, and credit history from college students before approving credit applications. (Reps. Slaughter, Duncan, Hastings, Alcee, Johnson, and Christensen)
  • Troops and Disabled Veterans:  Restricts credit card companies from making adverse reports to credit rating agencies regarding deployed military service members and disabled veterans during the first two years of their disability.  This would ensure that if a servicemember misses a payment while serving in a combat zone or recovering from a grievous service-connected injury, a poor credit rating would not prevent them from starting a business or purchasing a home.  (Reps. Teague, Nye, Boccieri, and Kissell)
  • 6-Month Promotional Rate:  Requires a 6-month period for a promotional credit card rate before the standard rate may be increased. (Rep. Perriello)
  • Choice on Over-the-Limit Fees:  Requires credit cardholders to opt-in to receiving over-the-limit protection on their credit card allowing the credit card company to charge an over-the-limit fee.  (Reps. Maloney and Watson)
  • Fair Allocation: Requires credit card issuers to allocate payments over the minimum to the portion of the remaining balance with the highest outstanding APR first, and then to any remaining balances in descending order.  (Reps. Gutierrez , Peters and Edwards (MD)
  • Minimum Payment Disclosure:  Requires credit card issuers to provide information to credit card holders regarding minimum payments including a minimum payment warning statement ("making the minimum payment will increase the interest you pay and the time it takes to repay your balance") on all monthly payments and the total cost to the holder of eliminating the outstanding balance in 12, 24, and 36 months. (Reps. Price, Miller (NC), Moran, Quigley, Lowey, Stupak, and Sutton)

Summary of the Credit Cardholders’ Bill of Rights


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