Credit Card Bill of Rights

For consumers with credit cards, it was a milestone. For credit card companies, it was a dark day. But whichever side you fall on, on April 30th, the U.S. House passed the Credit Cardholders’ Bill of Rights Act, which was introduced by Rep. Carolyn Maloney (D-NY). It passed the House by a vote of 357 to 70.

Heralded as a triumph for American families by Speaker of the House Nancy Pelosi (D-CA) went on to say, “Our economic recovery depends on a shared prosperity - and we must put an end to these abusive practices that continue to drive so many Americans deeper and deeper into debt.”

Her comments were evidently in reference to certain credit card company “abuses” noted on her website as: retroactive interest rate hikes on existing balances, no advance notice of rate increases, and double-cycle billing, among other things.

The Bill will not go into effect unless the U.S. Senate also passes this or a similar bill of their own. (They are debating the issue as of this article’s writing.) Should it become the law of the land, it will impact hundreds of millions, including nearly half of all American families that carry credit card debt. And 20% of all balances are carried on cards that are charging in excess of 20% APR. In fact, the credit card lobby purports that they will lose billions each year due to the new law - which translates to billions in savings for credit card users.

Without a doubt, the credit card industry has been a business rife with incentives to enroll in their easy-to-get credit, even for those under 18, yet also pockmarked with hidden charges, attractive short-term rates that unexpectedly balloon to many times their original figure at the slightest infraction, and so on.

To that end, credit card companies imposed a whopping $19 billion in penalty fees in 2008 on their customers, and are expected to break all records for late fees, over-limit charges, and other penalties in 2009. That figure is estimated to top out at over $20 billion according to Consumer Reports (3/17/09).

According to Speaker Pelosi’s own government website, these are among the many consumer-oriented benefits of the Credit Cardholders’ Bill of Rights Act:

1. Brings an end to arbitrary APR increases.
• Stops credit card providers from unfairly increasing APR on existing balances unless a consumer is over thirty days late, on the expiration of a promotional rate, or a few other stipulations in the bill.
2. Requires disclosures be more strong
• Ninety days after the bill becomes a law, credit card companies will have to give forty-five days advance notice of any interest rate increases or significant contract changes such as fees.
• Consumers must be warned of the cost of paying only the minimum amount each month.
• Makes credit card companies post contracts on company websites.
• Forces credit card companies to give thirty-day notices before before closing an account for inactivity.
• All disclosures in printed form must to be in12-point type at least .
3. Eliminates exorbitant “over limit” fees.
• Stops companies from charging “over limit” fees unless the consumer has enrolled in a service that approves these. It also stops companies from charging endless fees for a particular transaction.
4. Stops unfair penalties for good payers.
• Credit card companies can no longer charge unfair “double cycle” billing because it makes it illegal for them to charge interest on debts cardholders have already paid on-time.
• If there is any incidental leftover interest after paying off a balance on time, credit card companies cannot charge or interest on these leftovers.
• Stops credit card providers from charging fees if a customers pays their bill by phone or on the Net.

There are many more specifics that may interest you at the Speaker’s site and elsewhere on the Net, but one final reminder: This is only a proposed law thus far. For it to become law, it, or a similar bill of their own making, must be passed by the Senate and signed by President Obama.