Congress should mandate a higher level of fairness in credit card terms. Several members of Congress have introduced bills that would do exactly that. Rep. Carolyn Maloney (D-NY), with the backing of Rep. Barney Frank (D-MA), chair of the House Financial Services Committee, recently introduced the Credit Cardholders’ Bill of Rights Act. This bill takes a balanced approach to banning several of the most abusive credit card practices.
Among its provisions, Rep. Maloney’s bill would require lenders to give cardholders 45 days notice of any interest rate increases and the right to cancel their card and pay off the existing balance before the increase takes place. This would give more information and decision-making ability to consumers like those stuck in the scenario where Bank of America arbitrarily raised their rates without notice.
Another balanced approach was introduced by Sen. Carl Levin (D-MI) as the Stop Unfair Practices in Credit Cards Act, which also contains limits on many of the most unfair practices. Like Rep. Maloney’s bill, Sen. Levin’s bill would also prohibit lenders from practicing double-cycle billing, the practice where lenders can impose interest charges upon debt paid on time and in full. Among its other provisions, Levin’s bill would also limit penalty interest rate increase to no more than 7 percent.
When consumers better understand the terms and conditions of their credit, and if cardholder agreements are changed to give more decision-making ability to consumers, Americans will be able to make better choices about their credit cards. Unless action is taken, credit card debt could become the latest financial fiasco.
For more on the Center’s policies on credit card debt, please see: