Often biased, always thoughtful.

Bachmann and Kline vote against Credit Cardholders’ Bill of Rights

Minnesota’s Democratic delegation, and moderate Jim Ramstad, are working to turn things around for middle-class Minnesotans. With stagnating wages, increasing health care costs, and a rising price of living, our finances have been getting stretched thinner each and every year. One of our largest financial problems — both in Minnesota and nationally — is credit card debt.

Now the House has passed the Credit Cardholders’ Bill of Rights, a bill that aims to end unfair practices that contribute to a spiral of debt for poor and middle-class consumers. The bill:

• Ends unfair, arbitrary interest rate increases, by requiring ample notice before rate hikes and permitting lenders to raise rates on existing balances only if minimum payments are more than 30 days late (except for increases caused by changes in stated variable and introductory offers)
• Ends penalties on cardholders who pay on time, like charging interest on already repaid debt
• Protects consumers from due date gimmicks by requiring credit card companies to mail bills 25 days (instead of 14) before the due date
• Ends the credit card practice of applying consumer payments to lower interest debt first

(summary from Speaker Pelosi’s blog - see a more detailed summary after the break)

This is a simple, effective measure to help consumers pay less in interest, without imposing unfair or overreaching mandates on the credit card companies. It’s a common-sense approach to a pervasive problem, which allows the private credit card market to continue functioning while imposing simple and logical regulations. So why did Michele Bachmann and John Kline vote against it?

Unfortunately, neither seems to have made a statement about their rejection of this bill. I have to wonder, do Bachmann and Kline support credit card companies charging interest on already repaid debt? How about charging unlimited “over-the-limit fees” for a single transaction? How about using misleading and confusing language in their applications? I’d like to know what possible reason they have for voting against this bill.

Thanks to the rest of the Minnesota delegation and the Democrats in the U.S. House for passing this legislation. I’m ashamed that Bachmann and Kline don’t support it, but I’m glad to see that we once again have a Congress that believes in responsible regulation.

The following is Speaker Pelosi’s entire press release regarding the Credit Cardholders’ Bill of Rights:

On September 23, the House passed the Credit Cardholders’ Bill of Rights, H.R. 5244, which provides crucial protections against unfair, but unfortunately common, credit card practices, including:

• Ending unfair, arbitrary interest rate increases, by requiring ample notice before rate hikes and permitting lenders to raise rates on existing balances only if minimum payments are more than 30 days late (except for increases caused by changes in stated variable and introductory offers).
• Ending penalties on cardholders who pay on time, like charging interest on already repaid debt.
• Protecting consumers from due date gimmicks by requiring credit card companies to mail bills 25 days (instead of 14) before the due date.
• Ending the credit card practice of applying consumer payments to lower interest debt first.

Ends Unfair, Arbitrary Interest Rate Increases

• Prevents card companies from unfairly increasing interest rates on existing card balances – retroactive increases are permitted only if a cardholder is more than 30 days late, if a pre-agreed promotional rate expires, or if the rate adjusts as part of a variable rate.
• Requires card companies to give 45 days notice of all interest rate increases so consumers can pay off their balances and shop for a better deal.

Lets Consumers Set Hard Credit Limits, Stops Excessive “Over-the-Limit” Fees

• Requires companies to let consumers set their own fixed credit limit.
• Prevents companies from charging “over-the-limit” fees when a cardholder has set a limit, or when a preauthorized credit “hold” pushes a consumer over their limit.
• Limits (to 3) the number of over-the-limit fees companies can charge for the same transaction – some issuers now charge virtually unlimited fees for a single limit violation.

Ends Unfair Penalties for Cardholders Who Pay on Time

• Ends unfair “double cycle” billing – card companies couldn’t charge interest on debt consumers have already paid on time.
• If a cardholder pays on time and in full, the bill prevents card companies from piling additional fees on balances consisting solely of left-over interest.

Requires Fair Allocation of Consumer Payments

• Many companies credit payments to a cardholder’s lowest interest rate balances first, making it impossible for the consumer to pay off high-rate debt.  The bill bans this practice, generally requiring payments to be allocated proportionally to balances that have different rates.

Protects Cardholders from Due Date Gimmicks

• Among other measures, requires card companies to mail billing statements 25 calendar days before the due date (up from the current 14 days), and to credit as “on time” payments made before 5 p.m. local time on the due date.

Prevents Companies from Using Misleading Terms and Damaging Consumers’ Credit Ratings

• Establishes standard definitions of terms like “fixed rate” and “prime rate” so companies can’t mislead or deceive consumers in marketing and advertising.
• Gives consumers who are pre-approved for a card the right to reject that card prior to activation without negatively affecting their credit scores.

Protects Vulnerable Consumers From High-Fee Subprime Credit Cards

• Prohibits issuers of subprime cards (where total yearly fixed fees exceed 25 percent of the credit limit) from charging those fees to the card itself. These cards are generally targeted to low-income consumers with weak credit histories.

Bars Issuing Credit Cards to Vulnerable Minors

• Prohibits card companies from knowingly issuing cards to individuals under 18 who are not emancipated minors.

Background

At a time when the Bush Administration has proposed a massive bailout of Wall Street, Congress is working to help protect the families on Main Street facing unfair practices from the credit card industry.

Credit-card debt in the U.S. has reached a record high —nearly $1 trillion — and the average American household’s debt from credit cards has risen from $2,966 in 1990 to $9,840 in 2007.  And with the economy slowing, costs of daily living and unemployment rising, growing numbers of cardholders are unable to keep up with their payments.

The debt crisis inundating so many Americans is partly the result of an industry with few regulations and little oversight.  Consumers nationwide are facing excessive credit card fees, sky-high interest rates, and unfair, incomprehensible agreements that credit-card companies revise at will.

In 2007, credit-card issuers imposed $18.1 billion in penalty fees on families carrying credit card balances—up more than 50% since 2003 and accounting for nearly half of the $40.7 billion in industry profits.  This year, card companies will break all records for late fees, over-limit charges, and other penalties, pulling in more than $19 billion.

The Credit Cardholders’ Bill of Rights puts into law a number of regulations proposed by the Federal Reserve Board from earlier this year. The Fed has recognized that abusive credit practices distort the free market and competition.

While protecting consumers, the measure allows credit card companies to take steps to account for the financial risk of the consumers to whom they are lending money.

Because it is time to make sure that the market works for the American people with common sense regulations of the financial services industries, the bill is supported by consumer organizations (Consumers Union, Consumer Federation of America, Center for Responsible Lending, National Consumer Law Center, Consumer Action, National Community Reinvestment Coalition), civil rights groups (Leadership Conference on Civil Rights, National Council of La Raza, LULAC, NAACP, MALDEF, AAUW),  public interest groups (Public Citizen, U.S. PIRG), and labor unions (AFL-CIO, SEIU, American Federation of Teachers, and UAW).

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