Credit Card Holders Have Rights Too
Momentum has shifted in Washington toward credit card reform. After passing the House last fall, the confluence of Barack Obama's longtime interest in credit card reform, federal regulators' implementation of new regulations, Senator Christopher Dodd's renewed championing of the issue, and the massive bipartisan margin of victory in the House (357-70) on my Credit Cardholders' Bill of Rights two weeks ago, the Senate is, as I write, grappling with the task of finding sixty votes.
The sensible, balanced provisions in my bill are the result of well over two years of coalition-building and negotiation begun after Democrats regained the majority in the House in 2007. I held numerous roundtables, six Congressional hearings and many individual meetings to determine how Congress, federal regulators and credit card companies could work together to help improve services and protections for card holders. On a parallel track, after an administrative finding that card company practices were "unfair" "deceptive" and "anti-competitive," the Federal Reserve drafted new rules governing card issuers. When posted for the comment period last summer, these garnered over 60,000 public comments, leading to the Fed's vote last December to implement their new regulations in July 2010.
The Fed's finding confirmed what many of us in Congress have been saying for years: responsible re-regulation of the financial services industry is needed to correct unfair and deceptive practices. I reintroduced the Credit Cardholders' Bill of Rights (HR 627) this year with House Financial Services Chairman Barney Frank (D-MA) and 128 cosponsors.
HR 627 draws a line in favor of consumers by banning most retroactive rate increases on existing balances (except where the card holder is thirty days late in making payment) and increasing notification of any interest rate hikes going forward to foty-five days. It also stops the annoying tricks and traps that cost card holders money: due-date gimmicks, misallocation of payments on balances with different interest rates, double-cycle billing; and it bans issuance of cards to minors.
It goes further than the Federal Reserve's rules by banning so-called "pay-to-pay" fees, by giving cardholders the right to set a "hard" limit on their credit line if they choose (or if they'd prefer, allowing them to opt in to an over-limit program for a specific fee) and establishing new data-reporting requirements for the industry so that regulators, legislators and the public may monitor the impact of card-holder and industry practices.
The Credit Cardholders' Bill of Rights would also be better than the regulators' rules simply by virtue of being in statute--with the full force of law--changeable only by the courts or future legislation, and immune to the pressures of any future administration that might prefer more lax enforcement and oversight of the credit card industry. In opposing HR 627, card issuers argue they will be forced to cut credit lines, increase rates and restrict issuance of new cards. But who are they kidding? Card issuers are already massively reducing credit lines and increasing interest rates, even on customers with good credit scores and flawless histories of paying on time. And their use of fear-mongering rings hollow: these companies also opposed this measure in good times, using different arguments, long before the current economic crisis.
The Senate is poised this week to begin debate on their version of credit card reform, where Senator Christopher Dodd's Senate Banking Committee reported his "Credit CARD Act" (S. 414) to the Senate floor by a one-vote margin in March.
American credit card holders need the protections from arbitrary rate hikes and exorbitant fees now more than ever, as many turn to their credit cards to help pay bills, buy groceries and make ends meet in this economic crisis.
There's still more Congress can do to help consumers. I've reintroduced my Banking Hotline bill (HR 1455), which establishes a single toll-free number and website to help consumers register complaints about their banks. And my Overdraft Protection Act (HR 1456) brings overdraft fees--which have exploded with the rise of debit cards--under the Truth in Lending Act, has already had a hearing in March before the Financial Institutions and Consumer Finance Subcommittee.