Maloney's 'Bill Of Rights' For Credit Card Users Abolishes Abuses
BY JOHN TOSCANO

"Regrettably, regulators and prior Congresses have dropped the ball on protecting consumers in recent years. My bill would give cardholders the information and rights they deserve to make decisions about their own credit."

Seeking to abolish major credit card abuses that hurt consumers while increasing fair competition and free market values for credit card holders, Congressmember Carolyn Maloney recently introduced the Credit Cardholders' Bill of Rights Act of 2008.

Maloney, chairperson of the House Financial Institutions and Consumer Credit Subcommittee, said in unveiling the measure: "A credit card agreement is supposed to be a contract, but in recent years cardholders have lost the ability to say no to unfair interest rate hikes and fees."

The Queens/Manhattan lawmaker added: "This balanced, moderate bill simply levels the playing field between card companies and cardholders while fostering fair competition and free market values. It sets no rate caps, fees or price controls, nor does it dictate any business models to card companies."

Maloney pointed out, "There is no doubt that credit card companies provide a valuable service and deserve to earn a fair profit, but consumers deserve the right to be able to understand their accounts and be empowered to control them.

"Regrettably, regulators and prior Congresses have dropped the ball on protecting consumers in recent years. My bill would give cardholders the information and rights they deserve to make decisions about their own credit."

As a protection against arbitrary interest rate increases, Maloney's bill requires credit card companies to give cardholders 45 days' notice before raising an interest rate.

The bill also gives cardholders the right to cancel their cards and pay off their existing balance at the existing interest rate and repayment schedule if they get hit with an interest rate hike, and gives the cardholder three billing cycles after the rate increase to say "no" to the new terms.

The Bill of Rights also prevents card companies from retroactively increasing interest rates on the existing balance of a cardholder in good standing for reasons unrelated to the cardholder's behavior with that card (the so-called "universal default" rate increase).

Maloney's bill also prohibits card companies from charging interest on debt that is paid on time during a grace period and prohibits card companies from slapping fees on the remaining interest-only balance of a cardholder who has paid his bill on time.

In an effort to protect cardholders from "due date gimmicks", the bill gives cardholders time to pay their bills by requiring card companies to mail billing statements 25 calendar days before the due date (14 days is the current minimum). In addition, the bill requires that payments made before 5 p.m. Eastern Standard Time on the due date are considered timely and every card company is directed to provide on every statement a phone number and Internet address that a cardholder can access for payoff balances.

Applying lessons learned from the subprime interest rate mortgage crisis, Maloney stated, "Card companies should not give subprime credit cards to people who can't afford them."

Other provisions of her legislation require that cardholders be given the option of having a fixed credit limit that cannot be exceeded, directs companies to "fairly allocate payments on balances that have different interest rates, rather than requiring that a lower interest rate be paid off first and limits to three the amount of "over the limit" fees that can be charged.

Maloney also called for better Congressional oversight of the credit card industry.