The Credit Cardholders’ Bill of Rights Act of 2008 is a big hit with many consumer advocates, who say it offers much-needed protection from predatory credit card practices; however, banks warn that passage of the bill might actually wind up hurting consumers.
“Less risky borrowers will have to absorb the costs posed by riskier borrowers if issuers can't price everyone based on the risk they pose,” said Ken Clayton, senior vice president of card policy at the American Bankers Association in a Bloomberg.com article.
The article further states that “the percentage of credit-card debts that were unpaid after at least 30 days rose 22 percent this June over a year earlier, averaging 4.03 percent,” citing reports filed by various credit card companies and banks.
Creditors threaten that if the bill passes, they’ll have to closely scrutinize credit card applicants and deny credit cards to “high-risk” people who have low credit scores.
Proponents of the bill—like the National Association of Consumer Advocates—say that credit card companies have had their way for too long and this bill provides consumers with long-awaited protection.
Provisions of the Act
The act was recently approved by a vote of 39 to 27 by the House Financial Services Committee and should be heading to the floor for House action.
It’s intended to prevent sudden increases and fees from being easily tacked on to consumers’ credit card bills.
The bill includes the following provisions, among others:
- creditors can’t increase APR interest rates because of reasons such as a change in a consumer’s credit score—they may only increase the APR rate if the direct account becomes delinquent or when the contract expires
- consumers have the right to cancel the card and pay off the balance at the current rate should a creditor increase the interest rate when the contract expires
- consumers may reject any pre-approved credit card before they activate it and it will not affect their credit rating
- creditors can’t charge over-limit fees if the consumer is on a fixed-credit limit
- creditors must give at least 45 days notice to a consumer before increasing any rates
- creditors can’t charge interest on any charges paid during grace periods and can’t add on fees on an interest-only balance as long as payments are made on time
- creditors must use clear language in defining “fixed-rate” or “prime-rate” plans and provide easy ways for consumers to access information about their payoff balances
- creditors must divulge their profits and card fee and rate information to Congress
Stay tuned to Total Bankruptcy for more information on this important piece of bankruptcy legislation as it develops.
Tags: bankruptcy, consumers, credit card, Credit Cardholders’ Bill of Rights
This entry was posted on Thursday, August 28th, 2008 at 11:25 am and is filed under Your Credit Score. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.
I am amused by the statement, “Creditors threaten that if the bill passes, they’ll have to closely scrutinize credit card applicants and deny credit cards to “high-risk” people who have low credit scores.” This is the way credit was granted back when I was a mere teenager some 35 years ago. At that tender age, I also became an escrow officer (got my mother’s old job) at a savings and loan and saw first-hand what it takes to get a loan and what it takes to maintain a payment history so that one’s credit rating will be prime. It, in my day, was called “discrimination” if someone was a low wage earner and was unable to obtain certain credit. Now, that discrimination is against those of us who either do not use credit cards prolifically or pay our credit card bills when they are due. Also, there those of us who have the intelligence to use the electronic funds transfer feature authorizing the credit card company to pay themselves from our checking account and taking ourselves out of the loop for responsibility for making sure our payments arrive at the precise time for posting. The industry calls those of us who pay promptly and in full “DEADBEATS.” That’s funny! We used to call the 30-60-90 day delinquents the same thing. That was when morals existed.
“they’ll have to closely scrutinize credit card applicants and deny credit cards to “high-riskâ€� people who have low credit scores.”
Shouldn’t they be doing that ANYWAY ? Just shoveling out credit as they have been, just so they can rape consumers on fees when they DO default is nothing but GREED on their part. In addition, Prof. Elizabeth Warren had a long article on their so-called ‘risk pricing’ that pretty much showed they’re full of you-know-what.