Two US Senators, Carl Levin (D-MI) and Claire McCaskill (D-MO) have introduced a bill that will help protect consumers against aggressive credit card practices. Especially targeted in the proposed legislation is the ability to raise rates on one account if an account at another entity is paid late.
"Lenders have a legitimate concern if someone is not properly managing their credit, but once credit is granted, that concern needs to be limited to the consumer's relationship with the lender, not continually re-evaluated," said Consumer Help Web President Joan Bounacos. "Making a late payment on a single credit card is not good, but should not cause other lenders to automatically raise rates. That's a poor excuse to take advantage of a consumer who is already having trouble."
Multiple consumer advocates endorsed the legislation, known as "The Stop Unfair Practices in Credit Cards Act". The bill's other protections are also consumer friendly:
Interest Rates
* No Interest on Debt Paid on Time. Prohibit interest charges on any portion of a credit card debt which the card holder paid on time during a grace period.
* No Trailing Interest. Prohibit added interest charges on credit card debt which the card holder paid on time and in full.
* Limits on Penalty Interest. Prohibit interest rate hikes on a credit card account unless the card holder agrees to them at the time, and in any event, limit penalty interest rate hikes to no more than a 7% increase.
* Apply Interest Rate Increases Only to Future Debt. Require increased interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.
Credit Card Fees
* No Interest on Fees. Prohibit the charging of interest on credit card transaction fees, such as late fees and over-the-limit fees.
* Restrictions on Over-Limit Fees. Prohibit the charging of repeated over-limit fees for a single instance of exceeding a credit card limit, and allow such fees to be charged only when a card holder’s action, rather than a penalty, causes the limit to be exceeded.
* No Pay-to-Pay Fees. Prohibit charging a fee to allow a credit card holder to make a payment on a credit card debt, whether payment is by mail, telephone, electronic transfer, or otherwise.
* Reasonable Currency Exchange Fees. Require currency exchange fees to reasonably reflect the credit card issuer’s actual costs.
Other Protections
* Prompt and Fair Crediting of Card Holder Payments. Require consumer payments to be applied first to the credit card balance with the highest rate of interest, and to minimize finance charges. Prohibit late fees if the card issuer’s action caused the delay in crediting a payment.
* Fixed Credit Limits. Require that card issuers must offer consumers the option of having a fixed credit limit that cannot be exceeded.
“Credit card issuers too often sock consumers with sky-high interest rates and excessive fees, making it harder and harder for families to climb out of debt,” Levin said. “The goal of this legislation is to put an end to unfair and abusive credit card practices that outrage so many American families. I’m afraid these practices have become too entrenched and too profitable to the credit card companies for the companies to change them on their own. Congress needs to enact pro-consumer legislation to put an end to these unfair practices.”
Labels: Bounacos, credit, legislation, Levin, McCaskill
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