New York Democratic Representative Carolyn Maloney has introduced legislation in Congress that would curb some of the most abusive business practices of the credit card industry, putting the issue of credit card reform back on the legislative calendar and square in the spotlight.
The "Credit Card Bill Of Rights Act," co-sponsored by House Financial Services Chairman Barney Frank (D-MA), specifically targets interest rate hikes and surprise fees on charges that can often add up to thousands of dollars' worth of extra payments on a credit card balance. The bill's provisions include prohibitions against the following:
• 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;
• Applying certain unfair interest rate hikes retroactively to balances incurred under the old rate.
The bill's provisions won support from consumer action groups such as the Consumer Federation of America (CFA) and Consumers' Union.
"This legislation is an important step forward in eliminating the worst credit card tricks and traps that sap billions of dollars from Americans' wallets every year and illegitimately pump up issuers' profits," said CFA's legislative director Travis Plunkett.
"We commend [Congresswoman] Maloney for recognizing that these abuses contribute to the rising rate of card delinquencies and the need to rein in unfair practices to forestall an even greater crisis."
"This bill rests on the basic principle of fair dealing that every American expects -- a deal is a deal," said Jeannine Kenney, senior policy analyst for Consumers Union. "It ends 'bait-and-switch' tactics by preventing credit card companies from increasing interest rates and fees during the term of the card for reasons they haven't told you about up front. They can't simply reserve the right to arbitrarily change these terms."
Maloney has made reform of the credit card industry a hallmark of her tenure in the House. Her Web site lists a series of "gold standard" credit card principles that all lenders should abide by, including providing clear notice of changes in terms and easily understood benefits, features, and risks of any card.
Although the new Democratic-majority Congress came out swinging hard in favor of reforming the credit card industry, and held several hearings blasting the financial industry for its more egregious practices, there has been little traction towards passing actual reform.
As the financial industry absorbs massive losses from the fallout of the mortgage meltdown, banks have been rushing to increase fees and hike interest rates on credit cards for any reason in order to maintain profitability. This has led to increases in credit card debt worldwide, as cash-strapped consumers juggle ballooning mortgage payments, high utility bills, and escalating credit card fees.
