October 20, 2008


In May I blogged about potential credit card changes that were being discussed to crack down on unfair and deceptive industry practices. Representative Maloney of New York spearheaded the bill, H.R. 5244: Credit Cardholders' Bill of Rights Act of 2008, which would serve to amend the current Truth in Lending Act.

The bill passed the House (by nearly a 3 to 1 vote) on September 23rd. Govtrack.us - a website that tracks Congressional action - provides helpful details to track the progress/status of the bill (the full text of the bill is also provided).

Why is the bill being proposed?
Rep. Maloney: “Credit cards are an essential part of our economy, but for too long card issuers have been allowed to do whatever they want, any time, for any reason. A deal is a deal, but what sort of deal is it when one side gets to make all the decisions? This bill will get credit card practices back to basic principles of contractual fairness.”

"In 2007, credit card issuers imposed $18.1 billion in penalty fees on families carrying credit card balances—up more than 50% since 2003 and accounting for nearly half of the $40.7 billion in credit-card industry profits. While credit card companies will pull in more than $19 billion this year from late fees, over-limit charges, and other penalties, consumers nationwide are facing excessive credit card fees, sky-high interest rates, and unfair, incomprehensible agreements that credit card companies revise at will."

What issues would the proposed bill address?
- Bar creditors from changing agreement terms [open-ended accounts] until contract renewal (or for specific reasons laid out in contract).

- Eliminates universal default clause.

- Ends the credit card practice of applying consumer payments to lower interest debt first.

- Prohibits a creditor from furnishing information to a consumer reporting agency concerning a newly opened credit card account until the consumer has used or activated the credit card.

- Protects consumers from due date gimmicks by requiring credit card companies to mail bills 25 days (instead of 14) before the due date.

- Requires advance notice of rate increases on account. Authorizes a consumer who receives such notice to: (1) cancel the credit card without penalty or imposition of any fee; and (2) pay any outstanding balance that accrued before the effective date of the increase at the APR and in the repayment period in effect before notice was received.

- Requires each periodic account statement to provide specified information on obtaining the payoff balance.

- Restricts the frequency of over-the-limit fees.