Credit Card Holders’ Bill of Rights – What’s In It for You?

Consumers struggling with credit card debt can take heart from knowing that changes are on the way. Lawmakers finally began making strides towards credit card reform at the end of April 2009, when the House approved a bill that would restrict some of the more abusive credit card practices and introduce greater consumer protections. The first step towards tighter credit card legislation passed convincingly with a vote of 357-70.

The House vote is a step in the right direction for consumer advocates and those among Democrats, who have lobbied for years to bring tighter regulation to the credit card industry. But if the bill makes it through the Senate, which changes will it introduce and what will they mean for credit card holders? Here are the highlights of the Credit Card Bill of Rights passed in the House. The bill would:

• Ban double-cycle billing and retroactive interest rate hikes.
• Expand the length of the notice card holders are required to get about interest rate increases to 45 days.
• Prohibit issuing credit cards to anyone under 18
• Limit the credit lines for credit cards issued to college students, if there is no co-signer, and require proof of income and credit history.
• Allow card holders to set a credit limit for themselves, which cannot be exceeded.
• Eliminate the practice of applying payments to the balances with the lowest interest rate first. The House bill requires that any payments exceeded the minimum monthly level be applied first to the portion of the balance with the highest interest rate.

If passed into law, the new measure requiring that card holders get 45 days’ notice of interest rate hikes could take effect in as little as three months. Most other parts of the legislation, including a ban on double-cycle billing, wouldn’t take effect for a year.

Attempts at credit card reform have met with strong opposition from bankers and their lobbyists. Despite the economic meltdown caused by the subprime mortgage debacle, banks continue to be one of the most powerful lobbying groups in Washington.

So not surprisingly, the House bill is as noteworthy for what it does not contain as what it does contain. Most notably, a proposal to cap interest rates on consumer credit cards at 18% APR never made it to the floor for a vote, along with seventeen other amendments seeking to add further consumer protections to the bill.

The next step is a Senate vote on similar legislation. The Senate bill includes many of the same provisions as the bill passed in the House with some important additions: it proposes to restrict over-the-limit fees to one per billing cycle, ban universal default, and prevent credit card issuers from changing the terms for card holders, who pay their bills on time.

Published: May 29, 2009