Meet The Credit Card Accountability Responsibility and Disclosure Act of 2007

Remember all of that government debate about the credit card industry? Well, a piece of legislation that addresses the debate has been introduced in the House of Representatives and is currently before the Financial Services Committee. The bill requires several changes, including things like advance notice of interest rate changes.

Many people don’t realize it, but credit card companies have the right to change the terms of the credit card contract and to increase the fees the company charges unilaterally, according to Bob Lawless on the Credit Slips blog. This new legislation would give the consumer the right to receive notice of the change, then cancel the card and pay off the remaining balance under the old interest rate.

The legislation would, if passed, put an end to “Universal Default” which is a technique used by creditors to raise interest rates based on things like late payments to a utility or other account unrelated to the credit card.

The bill would also prohibit credit cards from being issued to minors without a parental signature and “submission of financial information proving the minor has independent means to pay,” or completion of a credit card counseling course.

There are a few other issues addressed in the bill, such as a requirement to disclose the late payment deadline and the postmark date requirement. This is an issue we get emails about all the time, you’d be surprised.

Another section would require disclosure in the credit card statement of how large the monthly payment would need to be in order for the customer to pay off the bill in 36 months. So head over to the Library of Congress website and give it a read. If you support this legislation… you know what to do! —MEGHANN MARCO

Credit CARD Act of 2007 [Credit Slips]
Credit Card Accountability Responsibility and Disclosure Act of 2007 [Library of Congress]
(Photo: Brett L)

Comments

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  1. Lewis says:

    This SHOULD pass. Us lefties like it because it ever-so-slightly helps consumers understand that things they buy on plastic are quite far from “free.”

    The right-wing set should love it too, because if the actually connect the dots, they’ll see that despite the newly-eviscerated BK laws, BK do still happen and they are not good for the lending industry.

    A win-win, just hope TPTB see it that way.

  2. gorckat says:

    This new legislation would give the consumer the right to receive notice of the change, then cancel the card and pay off the remaining balance under the old interest rate.

    Old MBNA used to do that. (Almost) No one ever read the notice. In certain cases they were given the option to close and keep the old rate.

  3. thrillhouse says:

    The bill would also prohibit credit cards from being issued to minors without a parental signature and “submission of financial information proving the minor has independent means to pay,”…

    Shouldn’t they require that of adults too? The “means to pay” part that is.

  4. kmg says:

    Is it really necessary to prohibit credit card companies from issuing cards to minors? As it stands, any contract the minors signed with the comapnies would be nunenforceable, simply by virtue of their underage status, yes?

  5. Buran says:

    Seems like a decent law, at least from the summary.

  6. timmus says:

    The bill would also prohibit credit cards from being issued to minors without a parental signature and “submission of financial information proving the minor has independent means to pay,” or completion of a credit card counseling course.

    You’ve got to be kidding me — the banks issue credit cards to MINORS?

  7. All of this is stuff they either should be doing anyway (if the industry had any interest in regulating itself) or things that that should never have been allowed to get away with.

    Universal Default is bull. Period.

    When and how did it become ok for people/companies to share your financial information in the first place?

  8. Lewis says:

    @Rectilinear Propagation: “When and how did it become ok for people/companies to share your financial information in the first place?”

    In the late 19th century, I believe, when local merchants would share “reports” on how customers did in terms of paying back on “credit.”

    That, the story goes, is how at least one of the CRAs can trace its roots.

    We really are fortunate that the Congress did see fit to pass the FCRA. Aside from being relatively toothless for consumers, we’d still be completely and utterly screwed without it.

  9. yellojkt says:

    I have closed several accounts when they raised the rates and sent notices. The problem is that any accidental charge to that account (such as an automatic recurring payment) can result in acceptance of the new terms.

    And Universal Default is an atrocity. One late payment on an obscure gas card can cost hundreds of dollars in increased finance charges.

  10. mac-phisto says:

    nice. it also doesn’t allow over the limit fees for purchases approved by the lender for an amount that would cause the card to exceed the limit.

    i wonder if this could possibly bleed over to debit cards too?

    the question now is how many ppl on the financial services committee live in the banks’ pockets & have the power to a) block the bill in its entirety, or b) water it down so it’s not worth the paper it’s printed on.

  11. whydidnt says:

    Don’t worry, I’m sure the bank lobby will kill or severely water this down before it becomes a law. :(

    Seriously, though, I understand many don’t like Universal default, but the fact is if you are late on one account, you are much more likely to default on another account. Banks do risk based pricing all the time, this is just another way to do it.

    Why don’t consumers shop around for credit cards with agreeable terms, or quit using them altogether, rather than relying on congress to limit the free market? If you don’t like the terms then don’t use the card. If enough of us actually showed the card companies who has the power (us) they would change.

    I know this philosophy isn’t popular here at the consumerist, but I think we, as consumers, often don’t stand up in the right way, counting on congress to stand up for us, when congress is typically in the pockets of those we would stand against.

  12. Lordstrom says:

    Well as a adamant free market guy, I tend to be wary of laws that shouldn’t even be necessary if people were taking responsibility. The notion that a person even has debt on multiple cards seems ridiculous to me now. And believe me, I’ve been through all that. But I believe companies should be allowed to control their own policies.

    That said, I think the industry as a whole is evil. They don’t make clear the terms of the agreement. Instead you get a booklet full of fine unreadable print that is difficult to understand even for lawyers. Frankly, no one in their right mind should be agreeing to the terms of universal default. That is insane. But we all have to do it because credit cards are necessary for building credit and having immediate access of funds for paying bills.

  13. The bill would also prohibit credit cards from being issued to minors without a parental signature and “submission of financial information proving the minor has independent means to pay,” or completion of a credit card counseling course.

    Does this mean I cant steal the identities of newborn babes anymore? Damn.

  14. BritBoy says:

    Just how, exactly, would this prevent ‘Universal Default’ ?

  15. BritBoy says:

    Oh, oops, I should have read the link to the bill. Go see wording in sec 105.

  16. mac-phisto says:

    @BritBoy: try the click-thrus – just hover your mouse over the hotlink & click!

    SEC. 105. PROHIBITION ON UNIVERSAL DEFAULTS.

    Chapter 4 of the Truth in Lending Act (15 U.S.C. 1666 et seq.) is amended–

    (1) by redesignating section 171 as section 173; and

    (2) by adding at the end the following:

    `Sec. 171. Universal defaults prohibited

  17. mac-phisto says:

    @mac-phisto: doh! always hit refresh before posting dummy!

  18. Squeezer99 says:

    say goodbye to rewards cards if this passes :(

  19. Seriously, though, I understand many don’t like Universal default, but the fact is if you are late on one account, you are much more likely to default on another account.

    @whydidnt: Like I said, it’s bull.

  20. SexCpotatoes says:

    You wouldn’t like it if “Universal Default” applied to everything you did, would you? OH, you were 5 minutes late for a dr. or dentist appt., they can now charge you 10x the going rate for treatment, and don’t even try to go to a different doctor because we report it to Docquifax services and they’ll charge you 10x going rate for services as well. If a woman were late on her period and wound up pregnant due to her cycle slightly changing, well, the health insurance doesn’t have to cover any prenatal care, nor the delivery of the child, nor the healthcare of the child even though you’ve been on the “family” health insurance plan for 7 years. Oh, and your Health Insurance premiums have gone up because you were late, they’ll cost 3x as much as the current rate you have, and don’t even try to switch plans or companies, as we’ve reported you to the HealthsUnion reporting agency. Your irresponsible behavior has lead to you being late, and we can use that to justify any predatory increases in your costs that we choose. Thank you and have a nice day!

    Universal Default… enjoy.