Credit News and Advice

Credit cardholders’ “bill of rights” coming to Capitol Hill

With proposed legislation dubbed the Credit Cardholders’ “Bill of Rights”, New York Congresswoman Carolyn Maloney is hoping to reign in a number of credit card industry practices hurting U.S. consumers.

The bill aims to protect cardholders from numerous common credit card lending practices that result in getting consumers into debt (and keeping them there). The bill is trying to:

• Protect cardholders against arbitrary interest rate increases
• Prevent cardholders who pay on time from being unfairly penalized
• Protect cardholders from due date gimmicks
• Shield cardholders from misleading terms
• Empower cardholders to set limits on their credit
• Require card companies to fairly credit and allocate payments
• Prohibit card companies from imposing excessive fees on cardholders
• Prevent card companies from giving subprime credit cards to people who can’t afford them
• Require Congress to provide better oversight of the credit card industry

Specific credit card practices that are addressed by the bill include:

Banning universal defaults. This is when a credit card increases your interest rate because they found information on your credit report on another unrelated account.

Consumer-defined credit limits. The bill would give cardholders the right to set a credit limit and make the credit card enforce that limit, rather than allowing you to exceed the limit and charging you overlimit fees of $40 or more.

Interest rate freezes. In the event your card’s interest rate is going to go up, this protection would give consumers the ability to close their account and lock in their current interest rate until their balance is paid off.

Elimination of low interest first repayments. Credit cards make huge money by giving you a 0% balance transfer offer. How? Because when you make new charges at the regular interest rate, even if you think you are paying those charges off in full each month, the payment is actually being applied to your 0% balance, and finance charges are accruing on your new charges.

I imagine this bill has a long way to go before it is passed. The credit card industry has deep pockets and will undoubtedly pull out all the stops to limit the scope of this bill or kill it all together. I really hope not.