Maloney Issues Credit Card Reform Principles
BY JOHN TOSCANO

Credit card operations, which are presently pretty much dictated by card-issuing companies, would become a shared responsibility under legislation being prepared by Congressmember Carolyn Maloney.

The Queens/Manhattan lawmaker, in disclosing her planned legislation, stated that it would be guided by four principles that would serve as pillars of the proposed reforms.

"These are solid, common sense principles that will help guide the shape and scope of our credit card reform legislation and self-regulation," Maloney declared.

"These principles recognize that the modern risk-based pricing credit card system requires shared responsibility between credit card issuers and their customers."

Maloney, chair of the Financial Institutions Subcommittee, said she was confident that the principles will translate into reforms that card issuers, consumer groups, and members from both sides of the aisle will want to support.

Maloney's first principle states: "Issuers should issue credit cards on terms that the individual can repay." This would call for a careful underwriting process that must be used to evaluate a potential customer's ability to handle credit before issuing a card and to provide terms and credit limits appropriate to the customer's situation.

Issuers would be asked to eliminate "any-time any-reason repricing", and to offer the option of a card with a fixed rate for a fixed period of time.

The second principle states: "Issuers should clearly explain account features, terms and pricing at relevant times," Maloney said.

She explained, "Credit card issuers should provide clear and easily understandable explanations of account terms before a card is accepted or used, and throughout the customer's relationship."

Next, said Maloney, "Issuers should provide customers notice and choice with respect to changes in terms. "This should include issuers being required to provide cardholders notice and the opportunity to opt out when rates increase for any reason and also give the right to cancel the card and pay off the balance at the original rate.

Maloney's final guiding principle, she said, is: "Issuers should encourage responsible, successful credit use, especially among new credit entrants and customers with special needs."