Consumers Finally Allowed To Speak Out Against Abusive Credit Card Practices

Consumers were finally allowed this week to testify in favor of a proposed Credit Cardholders’ Bill of Rights without being forced to sign waivers allowing their creditors to release private financial records to the public. The three cardholders who testified lambasted their credit card companies for penalizing them even though they abided by their cardholder agreements.

Alpha Consumer, who was at the hearing, recounts:

[Susan Wones of Denver said one] of her Chase credit cards jumped from a 14.9 to 25 percent interest rate after she got close to, but didn’t exceed, her $6,000 credit limit. She said the interest rate on a second Chase card similarly shot up after she went $15 over her credit limit in the middle of a billing cycle, even though the beginning and ending balances were under the limit.

Susan’s testimony echoed that of fellow victim Steven Autrey, who said:

The NFL does not allow one team, in the midst of the fourth quarter, to unilaterally move their end zone 20 yards in their favor just because they don’t like the point spread. The rules are laid out before the kickoff, and the umpires enforce the same rules for both home and visiting teams for the whole contest. It’s time for legislation at the federal level that tells the credit card industry, “Game Over” to unilateral, one-sided, rule changes.

As a registered Republican, it has typically been my philosophy that business and commerce flourish and perform better with minimal government interference. However, when an industry sector proves time and again that it is unable to police itself and behave and engage in fair and ethical trade practices, legislative intervention is required.

The hearing started with a poignant warning from Senator Carl Levin (D-MI), the champion of similar legislation in the Senate. Ed Mierzwinski pulled these snippets from the Senator’s statement:

“credit card abuses faced by our middle class families add insult to injury …charging interest on penalty fees is wrong…contracts are totally incomprehensible…if this problem is going to be resolved it is going to be resolved here in Congress…The fed is looking at disclosures, it’s (looking is) endless.”

The two government agencies invited to testify took different positions. The FDIC hailed the measure as a pro-consumer piece of the legislation, while the Office of the Comptroller of the Currency’s representative crawled out from under the creditor’s table to declare her continued support for the smash-bang work of the free market.

The Credit Cardholders’ Bill of Rights is a wonder-packed piece of legislation that would:

  • Ban arbitrary rate increases
  • Force creditors to provide 45 days notice of any rate increase
  • Ban double-cycle billing
  • Empower cardholders to set limits on their cards and ban over-the-limit fees once that ceiling is reached
  • Ban excessive fees
  • Ban lending to subprime borrowers
  • Require creditors to mail bills at least 25 days before the due date, instead of 14 days as currently required
  • Require creditors to apply payments first towards high interest items

The bill currently has 101 cosponsors, which means that 334 Members still haven’t signaled their support for consumers. If your representative hasn’t signed on, call his/her office and demand an explanation.

The Credit Cardholders’ Bill of Rights: Providing New Protections for Consumers [House Financial Services Committee]
Live blog from credit card hearing [U.S. PIRG]
Credit Card vs. Consumer [Alpha Consumer]
HR 5244 – The Credit Cardholder’s Bill Of Rights [THOMAS]
Write Your Senator
Write Your Representative
PREVIOUSLY: How To Write To Congress
Credit Card Victims Muzzled, Ordered To Release Financial Histories Before Sharing Their Experiences
(Photo: the illustrious untitled13)

Comments

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  1. ClayS says:

    The point spread? Doesn’t Steven mean the score?

  2. azntg says:

    There are many New York reps co-sponsoring this piece. Looks like my rep isn’t. Time for me to write a letter.

  3. thirdbase says:

    don’t use credit cards if you do pay the balance in full each month. OK now that thats been settled we can get on with the discussion

  4. huadpe says:

    @thirdbase: Define “month.” One of the points of this bill is that CC companies will bill you at insane intervals and charge you late fees because of it.

  5. jsboehm79 says:

    How is banning lenders from lending to subprime borrowers a “right” for consumers?

    Forget the fact that the outrageous fees paid by subprime borrowers are what finance the wonderful rewards those “deadbeats” enjoy. What about people who have had trouble in the past, perhaps medical expenses that have pushed them into “subprime”. If they are unable to get credit how are they to re-establish positive relationships with lenders?

  6. ConsumptionJunkie says:

    Carey, I love all the cat pics!

  7. thirdbase says:

    @ huadpe: When you get your bill pay it right away in full. Sheesh, that clear enough for ya. Man no wonder we can’t learn to comunicate as a society. You didn’t even understand a simple concept. Did you go to the Clinton school of comprenhension?

  8. BugMeNot2 says:

    I have to scoff at this bill. While it is a small step in the right direction, there is a BIG omission from this bill, namely a sane cap on usurious interest rates. How in the hell can a bank charge someone 15, 20, 25, 30% interest. Especially when the Fed is only charging 2.25% There should be laws against this, in fact there are, but they are easily circumvented by banks running their credit operations out of NV, SD, or DE.

    Scoff! Scoff!

  9. Veeber says:

    @BugMeNot2: Ok The Fed is not charging Joe Consumer 2.25%. The 2.25% is the intended rate that the Fed would like banks to lend money to each other.

    Lending money to someone on their credit card at a significantly higher rate makes sense, as they are not using anything to secure the loan and is significantly riskier. 30% sounds a bit excessive, but it all depends on the consumer risk. The other option is to simply not give credit to those who are extremely risky.

    Given that, the policies outlined could definitely help to keep things fair. It would allow consumers greater control over their account and at least give them the information so that they know what to expect.

  10. ARP says:

    @thirdbase: That’s certainly good advice, but doesn’t resolve a few of the main problems- banks are moving the due dates forward and not mailing the bill until just before the due date. So, when you get your bill, you may only have (literally) a few days to pay. If you’re work pay cycle isn’t exactly synched with your credit cards, you can get hit with late fees and huge interest rates even though you had every intention of paying your bill in full.

  11. I don’t agree with payments being applied to high interest items first. A payment should be equally distributed. If 90% of your balance is high interest 90% of your payment should go to that.

  12. jfischer says:

    “…crawled out from under the
    creditor’s table to declare her continued support…”

    Gee, I wonder what she would have
    been doing UNDER their table.
    Sadly, I am the proud owner of a dirty, dirty mind.

    But yeah – FDIC control of banks and
    their credit and debit card offerings
    would be a refreshing change.

  13. bravo369 says:

    One thing i get from this site is the complete lack of integrity in business nowadays. Everything from companies not honoring their own ads to credit cards unilaterally changing terms because they aren’t making any or enough money off of you. Consumerist would have nothing to report about if businesses just took a step back and asked themselves whether their decision/policy is fair to everyone involved.

    with that said, it’s obvious that credit card companies are NOT being fair in how they treat customers. I still don’t understand how a contract can be altered at any time by only 1 side. doesn’t that defeat the purpose of a contract if it’s unilaterally changed?

  14. ARP says:

    @bravo369: Yes, but in the agreement you signed when you got your credit card, you agreed that they can change the agreement at any time. So, the theory is you had the opportunity to negotiate (ha!) or simply not sign up for the credit card.

  15. ohiomensch says:

    @huadpe:

    I had a credit card that had a billing cycle of 24 days.

    That works out to 15 “monthly” payments. Maybe their corporate headquarters is on Mars.

  16. ohiomensch says:

    @hypochondriac:

    I would love to know what would happen if I told all my credit card companies that I was only going to pay the cards with the lowest interest rates first, and every one else would get a dollar each month till the lowest one was paid off.

  17. magic8ball says:

    @jfischer: I read it that way too. I assumed that’s how they meant it … what legitimate reason could she have for being under there?

  18. ohiomensch says:

    @BugMeNot2:

    RE: 30% interest rates. There were caps. They used to call it loan sharking. Now its standard business practice.

    Look to our lawmakers. Hillary calls for a cap of 30% interest. Obama won’t commit to a number. Cowards.

  19. jsboehm79 says:

    @jsboehm79:

    So using the link to the proposed bill above, I answered my own concern, and I think the “Bans Lending to Subprime Borrowers” needs to be changed in the article above.

    The text in that section of the proposed legislation ([thomas.loc.gov]) does not keep lenders from issuing credit to subprime borrowers. What it does do is limit the way credit is issued to subprime borrowers.

    Specifically it says that subprime cards (like First Premier, Total Visa, Continental Finance, et al, aka “Fee Harvesters”) that charge fees in excess of 25% of the credit limit of the card must receive those fees before issuing the card to the applicant, and that the fees must not be charged to the credit limit of that card.

    That’s actually very good. At the very least it’ll make getting a secured card with a prime lender a more attractive option. I mean, if you’re gonna send hundreds of dollars to get a card you might as well send it to the bank that’ll give that money back to you eventually.

    And hopefully, if passed, it will put credit issuers like that out of business completely.

  20. azntg says:

    @ohiomensch: They’d say: “You go right ahead and do that. We’ll just raise your interest rate from 16.9% to the default rate of 35%. Furthermore, we’ll notate that on your credit report.”

    Too bad we can’t turn it around on them too *sigh*

  21. katylostherart says:

    it totally figures a republican would think private business would regulate itself appropriately.

    i like the two people who say “just pay it in full”. if the card’s an emergency card, usually that would imply that there aren’t sufficient funds otherwise to cover what needs to be paid for right now. i have an emergency card, if i had to use it, it would generally mean its one charge on it is going to be more money than i have on hand at the moment. meaning also probably more than is in my checking account, or worse checking and savings.

    please if you’re that rich, send me some money :) i promise a nice thank you note.

  22. JustAGuy2 says:

    @ARP:

    It’s really simple. Do you have the money in your checking account? If not, then don’t spend it on the credit card.

  23. humphrmi says:

    Football games don’t have umpires, they have referees. Umpires officiate baseball games.

    That said, I’m glad to see that the consumers voice was finally heard in Congress, without requiring them to risk identity theft.

  24. Buran says:

    @ohiomensch: Since the gravity on Mars is 1/3 that of Earth, does that mean that bounced checks go POING much higher than on Earth? ;)

  25. NotATool says:

    @humphrmi: Typical American football games have both an Umpire and a Referee, along with several other officials….

  26. dragonfire81 says:

    I’d love to see this bill become law but I don’t think it will, the special interest groups will destroy it like they destroy every other piece of pro consumer legislation.

  27. slackerjax says:

    I’ve got a question: why does such a substantial portion of the consumerist posting community have nothing but contempt for the consumers served by the website? Why are they even reading this blog?

  28. olegna says:

    I am always amused by the people who have Stockholm Syndrome to the American securities and financial services market.

    I am solvent, but for years I had to pay of $26,000 in CC debt. Every single one of those years the companies shafted me with high interest rates, at one point touching 30.99%. I paid off every penny and then some, and even after I paid ti all off it took a YEAR for the companies to gradually reduce my interest rate, and even after like six months of NO DEBT, my cc interest rates hovered above 15%.

    Total crap.

    The people here who have Stockholm Syndrome to the system are the same ones who, five years ago, would have had no problem with the banks “right” to repackage crappy mortgage loans and sell them as AAA securities — they would have said “oh, the it’s bank’s rights to find consumers to buy these securities — viva la free market!”

    What annoys me is that there’s really nothing wrong with any of these items in the bill, and yet… we still gotta deal with the financial services equivalent of those polygamist wives: people who will pull out that lame libertarian argument that the financial services industry has every right to engage in predatory lending.

  29. unclescrooge says:

    It’s pointless to contact my reps in Congress. Jeff Wentworth, Kay Bailey Hutchison, and John Cornyn have never backed one single piece of legislation that benefits consumers.

    Jeff Wentworth alone has authorized close to a dozen pieces of legislation protect the MPAA and the RIAA.

    He is in the pocket of business interests.

    And he has such a warchest that no democrat is willing to run against him.

    Isn’t it sad that the GOP, the party that claims to be family-friendly always sides with groups who targets families.

  30. ohiomensch says:

    @slackerjax:

    What else are they going to do while they are at work?

  31. Silversmok3 says:

    This bill is a step in the right direction, but I cant help but to think of the ‘workarounds’ banks will use to keep their pockets lined should this become law.

    Say hello to triple-cycle billing, mailing ‘advance’ bills early with your actual due bill, 120-day billing periods, and other card tricks.

  32. ARP says:

    @JustAGuy2: I do want to understand what you’re suggesting- you’re saying I should have enough money at all times to pay my credit card bill in full (along with all my other planned expenses)?

    Why have a credit card then? Isn’t the purpose of a credit card to purchase something you may not have the funds for at that very second? Yes you may have it in a few days or a week, but not at that second.

  33. Tyr_Anasazi says:

    @thirdbase:

    Ah, it’s good to hear from the children…such naivete is refreshing amid the sarcasm and cynicism of the big bad world…

    The whole point of this legislation is to keep companes from arbitrarily raising your rates if you *do* pay your payments on time…do you understand now, my son?

  34. ryatziv says:

    @ARP: To keep up your credit score, to get some cash back, to pay everything on one bill…

  35. dantsea says:

    It’s a good start, but I loved this quote:

    As a registered Republican, it has typically been my philosophy that business and commerce flourish and perform better with minimal government interference. However, when an industry sector proves time and again that it is unable to police itself and behave and engage in fair and ethical trade practices, legislative intervention is required.

    “Free markets rule! YEAH! Wait, what? No, for YOU, not for ME.”

  36. ideagirl says:

    @slackerjax: Thanks, good point. I ask myself that all the time. There are plenty of forums out there that welcome the pointy-headed, anti-consumer, pro-corporate commenters. IMO, those people can’t feel holier-than-thou in a forum where everyone holds their viewpoint. /rant

  37. ideagirl says:

    @thirdbase: I think I am the only one who got your point ; )

    It was sarcasm, folks. He was trying to get it out of the way so we could get on with the discussion.

  38. dantsea says:

    @slackerjax: Because Consumerist is a well-known blog that has attracted some mainstream media attention, there is, I suspect, a certain amount of astroturfing going on here from some companies and their PR firms.

    And then there are some people who actually think that way because they were dropped on their head at some point.

  39. TechnoDestructo says:

    @ohiomensch:

    I had one (chase) that changed the length of the billing cycle from month to month. And denied doing it, then admitted doing it, then, in a condescending tone, one CSR told me “sir, this is how credit cards work.”

    I no longer have that card.

  40. Pop Socket says:

    I had a CSR deny that they had changed my due date by a week (I automatically pay my account electronically 6 days in advance). The readjusted the due date, but refused to negate the late fee.

    It’s like whack-a-mole. Once one abusive practice has been stopped, another springs up.

  41. bbagdan says:

    Two things need to be corrected in the credit card industry:

    1. the 20% interest rates.

    2. the ability to continue to charge interest on principal that has been repaid.

  42. Tonguetied says:

    25 days before the due date? That seems a little excessive. You get the bill less than a week after the last due date so it very likely won’t reflect your payment…

  43. Geekybiker says:

    How about not allowing them to move the due date without your express permission? I love it when they jack around my due date in hopes of incurring late fees.

  44. ekasbury says:

    Write your congressperson no this one. It’s worth it.
    [www.house.gov]

  45. Mr. Gunn says:

    thirdbase: You wait until after your billing cycle has closed to pay your bill, even though you could have paid before it closed? I don’t think you’re in any position to be calling anyone stupid, my friend. Anyone that’s waiting on a paper bill to arrive in the mail is doing it wrong. You shouldn’t have paper statements mailed to you by anyone who has your info online.

    I think they should cut out the overlimit fees. Process the transaction if transaction + balance < limit, otherwise deny. Neither situation involves fees.

  46. anatak says:

    I don’t see any part of the legislation that actually does the following:
    # Ban arbitrary rate increases
    # Empower cardholders to set limits on their cards
    # Ban excessive fees
    # Ban lending to subprime borrowers
    # Require creditors to apply payments first towards high interest items

    Maybe I missed part of it.

  47. Keat says:

    @ARP: “Isn’t the purpose of a credit card to purchase something you may not have the funds for at that very second?”

    Unless it is an emergency, absolutely not.

  48. Keat says:

    @Mr. Gunn: “You shouldn’t have paper statements mailed to you by anyone who has your info online.”

    I missed a payment before because the CC company didn’t send out the “your statement is available” email. Just last month, that email didn’t arrive again. Luckily, I had the paper statement to remind me.

  49. Mr. Gunn says:

    Keat: If you’d written the due date on your calendar, you’d not need the luck, eh?