House passes Credit Cardholders’ Bill of Rights

The House today voted 312-112 to pass H.R. 5244, the Credit Cardholders’ Bill of Rights Act of 2008. The entire Bay Area delegation supported it.

Said House Speaker Nancy Pelosi, D-San Francisco:

“With the economic security of the American families in jeopardy, Democrats have been clear that we must insulate Main Street from the crisis on Wall Street. Central to our efforts is ending unfair lending practices by the credit card industry.

“For too long, the credit card industry has faced too few regulations and too little oversight. As a result, many Americans have become saddled with excessive credit card fees, sky-high interest rates, and unfair, incomprehensible agreements that credit-card companies revise at will. This legislation will put into law a number of regulations proposed by the Federal Reserve Board earlier this year that will help protect Americans from abusive lending practices.

“The Credit Cardholders’ Bill of Rights will provide working families with the fair lending laws they need, while ensuring that credit card companies can continue to make the loans on which many Americans rely. It is time to make sure that the market works for the American people with common-sense regulations of the financial services industries.”

And, from House Education & Labor Committee Chairman George Miller, D-Martinez:

“As most Americans know very well, credit cardholders increasingly confront problems stemming from the unfair practices of large credit card companies. High interest rates, outrageous late fees, ‘teaser’ rates, and inadequate payment periods drag many American families into debt and lower their credit scores. Unfair, incomprehensible agreements that credit-card companies revise at the drop of a hat complicate matters and add to the difficulties consumers have in managing their finances.

“I co-sponsored and voted today for the Credit Cardholders Bill of Rights to help consumers better manage their family finances and reduce their chances of being swindled by credit card companies. … With so many economic concerns facing our communities and our country, the last thing people need is deceptive practices by credit card companies to make things worse. Our bill is good for consumers and the economy and I urge the Senate to pass it as quickly as possible.”

Details of the bill, after the jump…

The bill aims to end unfair, arbitrary interest rate hikes on existing card balances: Retroactive increases would be allowed only if a cardholder is more than 30 days late, if a pre-agreed promotional rate expires, or if the rate adjusts as part of a variable rate, and credit card companies would have to provide 45 days notice of all interest rate increases, giving consumers more time to pay off their balances and shop for a better deal.

The bill also would require companies to let consumers set their own fixed credit limit and would prohibit charging “over-the-limit” fees when a cardholder has set a limit, or when a preauthorized credit “hold” pushes a consumer over his or her limit. Some issuers now can charge almost unlimited fees for a single limit violation; this bill would allow no more than three such fees for the same transaction.

The bill seeks to ends unfair “double cycle” billing, so credit card companies can’t charge interest on debt consumers have already paid on time; if a cardholder pays on time and in full, the bill would keep card companies from piling more fees on balances consisting only of left-over interest.

Many companies credit payments to a cardholder’s lowest-interest-rate balances first, making it impossible for the consumer to pay off high-rate debt; this bill bans such practices, generally requiring payments to be split proportionally among balances with different rates (such as purchases and cash advances, for example).

Credit card companies would have to mail billing statements 25 calendar days before the due date, up from the current 14 days, and to credit as “on time” any payments made before 5 p.m. local time on the due date.

The bill aims to eliminate fine-print doublespeak by creating standard definitions of terms like “fixed rate” and “prime rate,” so companies can’t mislead or deceive consumers in marketing and advertising. A consumer pre-approved for a card would have the right to reject that card before activation without negatively affecting their credit scores; issuers of subprime cards with total yearly fixed fees exceeding 25 percent of the credit limit would be banned from charging those fees to the card itself; and credit card companies would be prohibited from knowingly issuing cards to people under 18 who aren’t emancipated minors.

Josh Richman

Josh Richman covers state and national politics for the Bay Area News Group. A New York City native, he earned a bachelor’s degree in journalism from the University of Missouri and reported for the Express-Times of Easton, Pa. for five years before coming to the Oakland Tribune and ANG Newspapers in 1997. He is a frequent guest on KQED Channel 9’s “This Week in Northern California;” a proud father; an Eagle Scout; a somewhat skilled player of low-stakes poker; a rather good cook; a firm believer in the use of semicolons; and an unabashed political junkie who will never, EVER seek elected office.