We all know what an uphill battle reforming abusive credit card practices has been. As a twenty-five year veteran of that fight, I know it as well as anyone. But this morning, the Senate took a big step up that mountain.
Today, the Senate Banking Committee passed the Credit Card Accountability Responsibility and Disclosure Act - legislation I wrote to stop abusive and deceptive credit card practices once and for all. Indeed, 2009 may well prove a watershed moment for credit card reform.
For people like Samantha Moore, a paralegal from Guilford, Connecticut I met a few weeks ago, it couldn't come a moment too soon. In January, she was three days late on a credit card payment - the first late payment in 18 years. For that seemingly minor transgression, she had her interest rate raised from 12% to 27% and her credit limit slashed from $31,400 to $4,500 - told that the reason for the severe penalty was that she hadn't been paying enough to other creditors and that their high credit limit exceeded their income.
Samantha was a victim of "universal default" - where credit card companies use unrelated information, like a late utility bill, to increase that family's rates.
Universal default is one of countless abusive practices credit card companies regularly engage in today that my legislation would put to an end.
Here are a few other practices the Credit C.A.R.D Act ends:
"Any Time, Any Reason" interest rate hikes. Issuers often unilaterally change the terms of a credit card contract before the term is up. One issuer "voluntarily" eliminated these hikes after Congress exposed them. They even ran ads stating that "a deal is a deal." But there is nothing binding them to that commitment, and most issuers have already gone back to the practice - one a Pew Charitable Trusts survey found in 93% of 400 cards issued by the country's largest banks and issuers. This bill makes that practice illegal.
Penalty Rates With No End. Let's say you've been a customer in good standing, and you have a reasonable interest rate of 12%. You pay your bill three days late, and you get raised to a penalty interest rate of 29.9%. Once that penalty rate increase is triggered, there is no limit on how long it will last. From that point on, you continue to pay your bill on time, but despite that, you continue to pay the penalty rate for the life of that card. The amount and duration of the penalty rate is entirely determined by the card issuer. My bill says that after 6 months of on time payment, your rate has to go back down.
Double-Cycle Billing. Say a few months ago, you had a credit card debt of a thousand dollars - and that since then, you've paid off $900 of that debt. It's not uncommon for credit card companies to keep charging interest not on a hundred dollars but on the full $1,000 for another cycle or two. The Credit C.A.R.D Act prevents that practice.
Aggressive Marketing to Young People. Recently, my seven year-old daughter received a credit card solicitation in the mail. Jackie and I laughed it off, but it brings up a serious point: young people are faced with an onslaught of credit card offers. And just as we saw in the mortgage crisis with lenders and borrowers, too often, issuers offer cards to young people without verifying any ability to repay whatsoever. This is particularly true for students, who are flooded with offers the second they set foot onto a college campus - in fact, industry officials have testified to Congress that simply being a college student is considered a "positive factor" toward the ability to pay. This bill simply says that credit card companies must take into account a young person's ability to repay before allowing them to take on what is all too often a lifetime's worth of debt.
The truth is, I've been working with advocates and consumer groups to reform credit card company practices for 25 years. For much of that time, our efforts have fallen on deaf ears. But I think this time is different.
And as we learned in this housing crisis, when companies lure people into deceptive, abusive and predatory financial agreements, it not only means mountains of debt for families, bankruptcy and financial ruin for too many - it can also prove catastrophic for our economy.
That is why I have said again and again that consumer protection must be at the forefront of our efforts to modernize our financial regulatory system. There are so many things we must do to make that possible. But none will be more important than reforming the practices of our nation's credit card companies drive so many families deeper and deeper into debt. It is one issue that quite literally touches every family in the country.
The moment to act is now.
Please pay attention, Mr. President. We need REAL Reform. We need common sense. We need Chris Dodd's "Credit Card Accountability Responsibility and Disclosure Act". Please do not give in - Please do not water it down - Please Give it Muscle!
I have never been late on a credit card payment and always pay the full balance. Yet Capital One says they are hiking my rate from 9% to 20%, and my only option is to close my account. I want to close the account on principle, but what bothers me is that this will, in turn, affect my credit rating negatively. What's wrong with this picture?
Thanks for pursuing this.
And I guarantee that it will never be allowed.
Charged interest can never be in excess of 3 percent of paid interest.
Example: A bank charges 13 percent for a person's credit card balance, they have to pay the very same person 10 percent for checking and savings accounts.
we know the bankers on Wall Street failed and they did it with malice and what's worse the crooks are still in charge
now is the time for all kinds of reforms and for the first time in a long time the Democrats have the upper hand
- cease the day Senator
- Americans should all be living as well as the people in Germany, who we defeated in WWII
For the memory of those who died protecting all Americans, out father, grandfathers and great grandfathers we should not be living worse than our former enemy.
Nations we protect, send or spend billions of dollar on offer their citizens health care, education, living wage jobs and fair housing.
Israel
Japan
UAE
Saudi Arabia
Most European Nations
even Iraq (they're still working out the bugs)
It's time for the United States to do the same for it's people. For the memory of those Americans who died and are still dying to protect all those nations above. Stop selling us short and do not besmirch their memory.
Clean up our books, but also impose a small international tax on these nations for all the protection we provide, have died and continue to die for. It's the least they can.
I wish to commend you for opposing the credit card industry and voting against the Bankruptcy Reform Act, which Bush signed into law. The act was a terrible blow to consumers because it no longer permitted them to discharge debts incurred by medical expenses, which is the major cause of all bankruptcies today. I hope you will work to revise that law.
Last week I posted this: I just got off the phone with Capital One to close both my accounts after being notified of the new interest hikes. I had the service rep laughing so hard... told her, "It says here that due to the economic crisis they must raise my interest rates. You tell because of the idiot who decided to raise the rates millions of people will close their accounts. Now why isn't this fool fired? Think I'm worried about my reputation as long as I'm paying it off? Closed account means bad reputation? Affects credit? Boo hoo! Capital One is the one with the BAD credit, not me. How's it feel to have a stupid boss, haha. Thanks to you guys the Loan Sharks are back in business and their interest rates are better!
Thanks but I think we are headed down a hill fast toward a brick wall with this matter. Something needs to be done NOW.
I've bee harping on this issue for the past 6 months What are we headed for now? Okay, unemployment is at an all time high and continuing to rise, CC companies are raising rates and cutting limits on the very people who can't afford it right now. What's going to happen with all of this? First housing and now credit? WE are bailing out the very banks who are raising rates from 10-27% on many formerly good (and employed) customers. My business started to suffer in direct correlation to arbitrary rate hikes and frozen credit lines (with 700+ credit scores).
They are gouging millions of consumers who will NEVER be able to pay what they owe now. This is the next crisis looming on the horizon. I guarantee it. The CC can do whatever they want to the consumer right now all while taking my money in bailouts.
Mr. Dodd, Mr. President - somebody listen. WE need a bailout - fairness in lending, jobs. How much more are WE supposed to sacrifice and suffer before anyone does anything?
Where have Richard Shelby and Barney Frank been while this stuff has gone on?
Sir, I would like to encourage you to reach even higher. Maybe in doing so, it will give you more leeway into getting this great legislation you mentioned passed.
Banks and financial institutions have been breaking the law right in front of our eyes, knowingly and willfully, because they know that they own our politicians, and nothing will be done about it.
By reaching higher, I mean, would you please consider bringing into legislation a law that will make it illegal for ANY FINANCIAL INSTITUTION to contributre to ANY POLITICAL CAMPAIGN in any way, shape or form.... ?
Maybe this legislation should be enacted FIRST, because the only reason why your fellow elected leaders will shoot down your wonderful bill you're about to introduce and I hope WILL get passed will be because banks own not just those who will oppose it, they own ALL OF YOU.
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AND another blow to our international reputation.
My insurance company was late in paying the hospital for my billed (to them) procedure. MY credit reports duly notes that *I* have the outstanding/late bill. . . not the insurance company, ME! Just try to get *that* fixed! MY credit rating suffers, affecting everything else I do, to include increases in my rates on insuring my home and cars! How absurd is that; that something NOT of MY doing should determine whether or not I am a responsible, conscientious consumer and am ‘credit worthy’?
Sadly, the big credit-reporting agencies, all 3 of them, have assumed too much power in determining the financial ‘worthiness’ of individual consumers. It’s time to pull in the reins on them – better yet, they should just be done away with, all together. Their reports are being used for things they were never meant to be used for – they aid and abet the abuse of their ‘power’ because it is profitable *to them*. If they were any other group so negatively affecting consumers by THEIR mistakes, they’d be shut down immediately.
The reason given me for the enormous, arbitrary hike? It is, they wrote, “in response to market conditions and to maintain profitability on your account.” In other words, in their greed and rush to make money, THEY screwed up by making unsound loans, but *I* have to pay for it.
If I don’t agree to the rate hike, they will close my account and I will still be responsible for the debt . . . and my credit rating will, sorry about the consequences, (is their view) go into the depths of the darkest hole by THEIR unilateral action of cutting off my credit with them. Yes, once again, the consumer is screwed . . . *serious* reform is WAY past due
And whatever bank you're money is in gets $100.00 fee drom your $700.00 disability check.. Plus, you can never even cash a check again even if it was a down payment. Why? Because even though it was your own money, it now exceeds your emept funds, & the banks can take your money.