03.31.09
By Gerri Detweiler
The Senate Banking, Housing and Urban Affairs Committee has passed S. 414, legislation to regulate credit card policies today, Tuesday March 31, 2009. The Credit Card Accountability, Responsibility and Disclosure Act ("the Credit CARD Act"), introduced by Senator Christopher Dodd (D-CT) aims to protect consumers from confusing, misleading, and predatory practices by credit card companies. Among other provisions, the legislation will:
- Protect consumers from any time, any reason interest rate increases and account changes;
- Prohibit unfair applications of card payments;
- Protect cardholders who pay on time;
- Limit fees and penalties;
- Ensure that cardholders are informed of the terms of their account; and
- Protect young consumers from credit card solicitations.
Senator Dodd, who spearheaded the legislation, notes that Connecticut residents carry the third-highest median amount of credit card debt in the country at $2,094 per person. Not surprisingly, personal bankruptcies and credit card delinquencies are on the rise as well.
When introducing the bill earlier this year, Dodd noted, "Families in Connecticut and across the country are struggling to make ends meet as layoffs continue, home values plunge, and lines of credit are cut or canceled. Far too many families are forced to rely on short-term, high-interest credit card debt to finance their most basic necessities. The last thing they need is further financial hardship brought on by abusive credit card practices – these practices are wrong, they’re unfair, and they must end. The Credit CARD Act will protect American consumers by bringing an end to these practices and strengthening consumers’ financial security and stability."
Consumer Action, which has launched a
campaign to gather support for the measure, says the bill would get rid of common
credit card traps, including early deadlines for credit card payments (such as cut-off times of 1 p.m. EST); fees to pay credit card balances by mail, telephone, electronic transfer, or any other way; and multiple over-limit fees for exceeding a card limit. It will also require issuers to lower penalty rates after six months if the cardholder has no further violations, and require cardholders to be given 45 days' warning of any allowable interest rate increases. The group say this campaign has been "very popular" with consumers and had resulted in many consumers contacting their legislators to request relief.
Some of the practices addressed in the legislation will be modified when new credit card regulations go into effect in July 2010. Many consumer advocates, however, are concerned that those regulations do not provide ample consumer protection. Credit.com has received numerous complaints from cardholders who have paid their bills on time, yet seen their credit card rates increase significantly and a recent survey by Credit.com found that 34% of cardholders have experienced some sort of negative action on their credit card accounts, including rate increases and cuts in credit limits.
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