Mark Winston Griffith
Credit Cardholders Bill of Rights: Financial Justice in a Temple of Doom
Watching Carolyn Maloney and consumer advocates shepherd the Credit Cardholders Bill of Rights Act of 2008 – introduced by Maloney to "level the playing field" between credit card consumers and card companies – will be like watching Indiana Jones trying to make it out of a temple of doom alive. Running at full tilt, holding one of the most important pieces of consumer protection since the Truth in Lending Act became law, supporters of HR 5244 will have to travel a dark and perilous gauntlet riddled with every boulder of death, fiery trap and legislative assassin that the credit card lobby can drop in their path.
One of the first of these traps awaits Maloney and her fellow Democrats in the House Financial Services Committee (which includes New York Democrats Nydia M. Velazquez, Gary Ackerman, Gregory Meeks, Carolyn McCarthy and Republican Peter King) where the HR 5244 is scheduled for markup.
The word is the Republicans will try to use some procedural shenanigans to gut progressive credit card reform efforts. In particular, there will be an effort to replace HR 5244 with a resolution to support similar, but less strong, proposals issued by the Federal Reserve. The strategy, as dictated by the credit card lobby, is to derail the congressional effort and eventually succeed in substantially watering down the Federal Reserve rules before they actually take effect.
This would be crime. Credit card companies have been having their way with consumers, hitting them with fees and interest rates that are grossly unreasonable and arguably arbitrary. And despite the claims of the card industry, their fees and rate changes more often than not do not correspond to any changes in the level of risk that the consumer may pose.
The Credit Cardholders' Bill of Rights boldly attempts to clamp down on a series of abusive credit card practices. Among other things, the bill:
• Prohibits "universal default" rate increases. This is a practice in which a card company will use any adverse credit information - unrelated to their own business and whether it be accurate or not - as a trigger for unilaterally jacking up their own annual percentage rate (APR);
• Eliminates the use of "double-billing cycles", a costly way of way of computing finances charges that can force you to pay interest on past balances that you may have already paid;
• Restricts the use of over the limit fees, "any-time, any-reason" rate changes, and retroactive applications of interest rates;
• Requires card companies to give advance notice of rate increases and enables consumers who receive this notice to cancel the credit card without penalties or fees, and to pay outstanding balances that accrued before the rate increase;
• Requires that card companies apply your payments proportionally to different balances that may carry different interest rates, thus preventing card companies from applying a payment to a lower interest rate balance first and then allowing your higher rate balance to remain.
• Prohibits a card company from giving consumer information to a reporting agency until after the consumer has actually activated or used the card;
• Requires that credit payments made before 5 p.m. on the due date are considered on-time and that card companies refrain from charging late fees when the consumer can prove that the mailed the payment within 7 days of the due date;
Ultimately, Congress can do both: Move ahead with HR 5244, while also expressing their support for the Federal Reserve's rules. As citizens we should demand this; as consumers we deserve it.