All I can say is it’s about time!

In case you haven’t heard, there’s a new movement underway in Washington this morning. Rep. Carolyn Maloney, D-N.Y. has become increasingly concerned about Americans being weighed down with $900 BILLION in credit card debt. And what’s worse, with the economy going down and lenders tightening their purse strings that $900 billion is going up as interest rates are increased.

Maloney has issued a proposal, appropriately dubbed the “credit cardholders’ bill of rights,” where she sets out to reform major credit card industry abuse and improve protection for consumers. Naturally, credit card industry officials and the banking industry in general are all opposed.

This new ‘bill of rights’ is a comprehensive look into the abusive practices of the credit card industry. Maloney argues that the industry is taking advantage of consumers during a time in which they are heavily relying on their credit cards to pay bills, buy groceries, and make ends meet. She’s calling for Congress to step in and take action.

So, how does this little ‘bill of rights’ affect you and me?

Well, among other things, Maloney’s bill would require that credit card companies give consumers a 45 day notice that there will be an interest rate increase, rather than the standard 30 days. Furthermore, if the consumer decides they would like to cancel the card instead of paying the increased interest rate, the remaining balance would stay at their current interest rate instead of shooting to the new interest rate.

This particular aspect of the bill is one that I can relate to in a big way right now. I have a credit card – whose nefarious name I will not mention! – that has decided I’ve somehow become such a risk that they want to increase my credit card to almost 30%. Mind you, I have a top tier credit score, never late on my payments, and I pay my balance in full every month. Naturally, I called to find out what the problem is and the customer service representative told me it was based on risk related information in my credit report. I have the FICO score watch, so I know where I stand. Since they weren’t willing to work with me, I canceled my card, but the remaining balance is going to accrue interest at the higher interest rate.

Needless to say, I had steam coming out of my ears!

The next big item on the bill is that credit card companies will be required to send monthly statements at least 25 days before the due date, which is up from the current 14 days. In addition, credit card companies would not be permitted to charge fees on the interest-only balance for consumers who have paid their bill on time. Remember my post about trailing interest? Well, with a statement in your hands 25 days before the due date, there’s going to be some trailing interest on it. The only reason the credit card industry hadn’t balked at this before was because they figured they could still charge fees on that interest. But, Maloney was on to their game. She specifically worded the bill in favor of consumers: if the monthly bill is paid on time then credit card companies CANNOT charge a fee for that trailing interest.

Maloney is also looking to tighten the disclosure requirements issued by credit card companies as well. As it stands, many consumers couldn’t tell you the terms and conditions of their credit cards and even if they could, they don’t understand the verbiage they’re reciting. So, in an effort to increase consumer protection, Maloney proposed that credit card companies be required to disclose their terms and conditions in a manner that the average consumer would understand, in a format that was easily used, and at a time when it is most helpful (i.e. before the consumer is charged an arm and a leg in fees).

Not surprisingly, industry experts are predicting this bill to back fire on consumers. If credit card companies are forced to keep interest rates at the lower rate when a card is cancelled – and they decide the consumer in question is a risk – then they are likely to just have higher rates on the outset. While that may very well be the case, it makes them uncompetitive in the market. Maloney doesn’t feel this will ultimately be an issue if the bill is passed. Consumers will know they have options and it won’t be a ‘take it or leave it’ kind of deal.

Personally, I hope this bill passes! It’s high time the credit card industry was held accountable for deceptive practices and their blatant abuse of consumer rights! While not all companies commit these heinous acts, there are enough of them that do to raise some concern. Consumer protection, especially during a recessionary period, should be Congress’ main concern.
Check out Maloney’s website here.

Related posts:

1. Where The Credit Cardholders’ Bill of Rights Stands
2. Obama proposes Credit Card ‘bill of rights’
3. The credit card Bill of Rights: An indepth look
4. Credit card bill on the way… (We hope!)
5. Got a Credit Card? Vote Obama!