05/22/2009 04:33 pm ET | Updated May 25, 2011

Historic Credit Card Legislation: First Step in Meaningful Credit Card Reform

This afternoon, President Obama signed a credit card bill to end abusive practices by credit card companies. This is an historic moment in our nation, since this is the first credit card reform legislation that has ever been passed by our government. It is a victory for Americans, a drop of hope in a pool of significant financial losses that we've suffered. NCLR commends lawmakers and the President for standing up for American families with a strong and meaningful credit card reform bill that protects consumers from the credit card industry's traps and tricks.

Credit cards are not the first thing that you think of when considering civil rights, yet this is an issue of incredible importance to the Latino community in the U.S. In today's tough economy, hardworking families are relying on their credit cards more than ever, and Latinos are no exception to this trend. For Latino households, it's not about keeping up with the Joneses anymore, it's about making ends meet.

Many Hispanic Americans depend on credit cards to cover unexpected expenses that could cripple a family's well-being, such as emergency trips to the pediatrician for a sick child or, car repairs that allow workers to commute and earn a living. And for those who have lost their jobs in this brutal economy, credit cards may be the only tool left to help families to put food on the table.

Today's new law takes on some of the credit card industry's most unfair practices that have kept many Latino families in cycles of debt. The law prevents credit card companies from arbitrarily raising interest rates and from raising rates on existing balances when a consumer has been late on other, unrelated bills. Although this is a great first step, we must be clear that this law alone will not solve all of the credit card industry's issues. Credit cards were intended to be instruments to build credit history and manage household debt, not deceptive tools that compound and sustain financial loss. We need to encourage the credit card industry to build new systems that restore credit cards to their original purpose: providing a bridge to build credit and supplying families with more options.

While this law is expected to change the way credit cards do business, many Latino card users still struggle to access credit. Credit cards frequently introduce people to the world of credit, and often define credit profiles for a lifetime. For example, if a consumer new to credit, such as a student or immigrant, receives a subprime card as their first credit card, they become branded as "subprime." Other subprime card issuers will actively solicit their business, while companies offering the best-priced cards will overlook them. One subprime card common among Hispanic consumers, referred to as a "fee-harvester," offers low limits and is usually billed as a market-entry card. Few users realize, however, that introductory fees eat up more than half the balance before a purchase is even made.

Barriers and challenges notwithstanding, credit cards are an important financial tool. Families use cards to build their credit history and open the door to large asset purchases, such as a car or a home, that have the potential to improve the household's financial security. Other families rely on cards to make ends meet or cover emergency expenses. As credit card companies rethink their product offerings to accommodate the new law (set to go into effect in February 2010), NCLR challenges card issuers to create products that truly help borrowers establish a sound credit history and a secure financial future.

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